An apple farmer must decide how many apples to harvest for the world apple market. He knows that there is a one-third probability that the world price will be $1, a one-third probability that it will be $1.50, and a one-third probability that it will be $2. His cost function is C(Q) = 0.01Q2. What is the expected price in the world apple market?
A. $2.00
B. $1.80
C. $1.40
D. $1.50
Answer: D
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Exhibit 2-13 Production possibilities curve
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