Question: Home-Grown is a small restaurant that specializes in serving local fruits, vegetables, and meats. The company has chosen to enter into a long-term relationship with

Home-Grown is a small restaurant that specializes in serving local fruits, vegetables, and meats. The company has chosen to enter into a long-term relationship with Family Farms, a local farming operation. The two parties have decided to enter into a long-term contract, where Family Farms will supply produce to Home-Grown at specified prices and volume each year. Before signing a contract, Home-Grown is trying to decide how long the contract should be. It estimates that each year the contract covers saves the restaurant $1,000 in bargaining and opportunism costs. However, each year the contract covers also requires more legal fees. Home-Grown estimates that the number of hours required from lawyers, L, has a quadratic relationship with the number of years on the contract, so that L = Y2, where Y is the number of years for the contract. If Home-Grown's lawyers charge $100 per hour, how long should the contract be?

Step by Step Solution

★★★★★

3.42 Rating (171 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

The marginal benefit for each year of the contr... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1364-B-E-M-E(7724).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

A building has a cost of $500,000 and accumulated depreciation of $40,000. The current value of the building is estimated to be $730,000. The company that owns the building is based in Genovia and...

The United Football League (UFL), a North American professional football league, has been in work stoppage since July 1, 2013, immediately after the six-week training camp ended. Faced with stalled...

The Creekside Inn is a restaurant that specializes in southwestern style meals in a moderate price range. Terry Ducasse, the manager of Creekside, has determined that during the last two years the...

25. HomeGrown is a small restaurant that specializes in serving local fruits, vegetables, and meats. The company has chosen to enter into a long-term relationship with Family Farms, a local farming...

HomeGrown is a small restaurant that specializes in serving local fruits, vegetables and meats.The company has chosen to enter into a long-term relationship with Family Farms, a local farming...

please answer Q 24 and 25 24. Andrew has decided to open an online store tltat sells home and garden products. After 25. searching around, he chooses the software company Initech to provide the...

CASE 03 Whole Foods Market in 2014: Vision, Core Values, and Strategy Arthur A. Thompson The University of Alabama ounded in 1980, Whole Foods Market had evolved from a local supermarket for natural...

Each of the following compounds is incorrectly named. What is wrong with each name, and what is the correct name for each compound? a. FeCl3, iron chloride b. NO2, nitrogen(IV) oxide c. CaO,...

On 1 January 2017, VMS Bhd, owns 50% of JV Sdn.Bhd., the joint venture. The following are the financial statements of VMS Bbd, and JV Sdo. Bhd. at 31 December 2017. Statement of Financial Position 31...

Companies only have to consolidate financial statements if they share 5 0 % or more ownership. A . True B . False

2. Indicate whether the following activities create a positive or negative externality: a. Late- night road construction begins on a new bridge. As a consequence, traffic is rerouted past your house...

Use the following normal- form game to answer the questions below. a. Identify the one- shot Nash equilibrium. b. Suppose the players know this game will be repeated exactly three times. Can they...

Consider a two- player, sequential- move game where each player can choose to play right or left. Player 1 moves first. Player 2 observes player 1s actual move and then decides to move right or left....

Use the following payoff matrix for a one- shot game to answer the accompanying questions. a. Determine the Nash equilibrium outcomes that arise if the players make decisions independently,...

can you show how you got the answer You are considering making a movie. The movie is expected to cost $10.3 million up front and take a year to produce. After that, it is expected to make $4.4...

3-3. (Preparing a balance sheet) Prepare a balance sheet from the following informa- tion. What is the net working capital and debt ratio? Cash $ 50,000 Accounts receivable 42,700 Accounts payable...

Gen. Robert E. Lee's Boyhood Home is for Sale The historic Virginia home that Confederate Gen. Robert E. Lee grew up in hit the market in April 2018 for $8.5 million. (Trapasso, C.) Robert E. Lee's...