A ship captain who buys commodities on islands where they are cheap and sellingthem on islands where they cost more. For this, he uses a fleet of ships that cancargo (tradeable commodities) and shield themselves and the rest of your fleet fromthieves. Ships are reviewed by their tons of cargo that they can carry and their"Combat Rating," this is the number of tons they can protect from being maraudedby pirates, and the number of operating crew. There are 2 ships that can bepurchase:NameCorvetteFreighterCargo Combat0 10T100T 0.ShipCost Crew$1M$10M110So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargois left unprotected, there is a 50% chance that it will be raided by pirates and taken.This means that if you purchased 9 Corvettes and 1 Freighter, 10T of cargo wouldbe unprotected and there would be a 50% chance that pirates would steal the10T of unprotected cargo. Suppose that each day, you can buy tons of food for $500($182,500 annually per ton) and sell them at a nearby island for $725 ($264,625annually per ton) and that each day you must pay your crew $1000 ($365,000annually per crew member) out of the profits that you earn. You have $100M tospend and the market-wide annual interest rate is 1.75%.1. Show that with your $100M, the most cargo that you could carry while beingfully protected from pirates would be a fleet that consists of 5 Freighters and50 Corvettes.2. You are considering instead investing your money. How much profit per yearwould you make if you purchased the fleet from part 1? How much interestwould you earn (in total) if you instead invested your money at the market-wide interest rate

As per given information There are 2 types of ships in the fleet. Corvette and Freighter Corvette…

A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 10T 0 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken.

A ship captain who buys commodities on islands where they are cheap and selling them on islands where they cost more. For this, he uses a fleet of ships that can cargo (tradeable commodities) and shield themselves and the rest of your fleet from thieves. Ships are reviewed by their tons of cargo that they can carry and their "Combat Rating," this is the number of tons they can protect from being marauded by pirates, and the number of operating crew. There are 2 ships that can be purchase: Name Corvette Freighter Cargo Combat 10T 0 100T 0. ShipCost Crew $1M $10M 1 10 So, it would take 10 Corvettes to fully protect the cargo of one freighter. If any cargo is left unprotected, there is a 50% chance that it will be raided by pirates and taken.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 16.3IP

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