Little Chicken farm (LCF) discovered that a common Asian plant has leaves that have antibiotic functions in fowls and are particularly effective in preventing some infections in ducks. To prevent such infections, duck farms have been adding antibiotics to duck feeds for ten consecutive days when the ducks are young. LCF’s research shows that by feeding a duck one pack of softgels of processed shredded leaves of the plants, ducks will not get infections even without using any antibiotics in feeds. The current antibiotic supplements used in duck feeds create severe side effects that kill 10% of the ducks. With this innovative LCF herbal solution, the mortality rate of ducks is reduced to 2%. It costs a duck farm $2 to buy and replace a dead duckling. Each surviving duck will lay an average of 30 dozen Problem Set #2 Due September 28 eggs in its lifetime on the farm; each dozen eggs sell at $0.80 per dozen on the wholesale market. LCF estimates that, because of its organic antibiotic solution (instead of the current industrial antibiotics), each surviving duck tends to produce an average of 4 more eggs during its lifetime on the farm, and that the duck eggs will also sell for $0.40 higher per dozen in the wholesale market (since they can be marketed as “from non-antibiotics-fed ducks”). Assume that the current antibiotic supplements cost the farmer $0.05 per duck per day. What is the economic value of one pack of LCF’s softgels of herbal supplements (relative to the antibiotics treatment)?
Little Chicken farm (LCF) discovered that a common Asian plant has leaves that have antibiotic functions in fowls and are particularly effective in preventing some infections in ducks. To prevent such infections, duck farms have been adding antibiotics to duck feeds for ten consecutive days when the ducks are young. LCF’s research shows that by feeding a duck one pack of softgels of processed shredded leaves of the plants, ducks will not get infections even without using any antibiotics in feeds. The current antibiotic supplements used in duck feeds create severe side effects that kill 10% of the ducks. With this innovative LCF herbal solution, the mortality rate of ducks is reduced to 2%. It costs a duck farm $2 to buy and replace a dead duckling. Each surviving duck will lay an average of 30 dozen Problem Set #2 Due September 28 eggs in its lifetime on the farm; each dozen eggs sell at $0.80 per dozen on the wholesale market. LCF estimates that, because of its organic antibiotic solution (instead of the current industrial antibiotics), each surviving duck tends to produce an average of 4 more eggs during its lifetime on the farm, and that the duck eggs will also sell for $0.40 higher per dozen in the wholesale market (since they can be marketed as “from non-antibiotics-fed ducks”). Assume that the current antibiotic supplements cost the farmer $0.05 per duck per day. What is the economic value of one pack of LCF’s softgels of herbal supplements (relative to the antibiotics treatment)?
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