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In 2 0 0 3 , Du Pont introduced Arathorn 2 5 , a polyethylene resin designed to compete with other resins in the manufacture

In 2003, Du Pont introduced Arathorn 25, a polyethylene resin designed to compete with other resins in the manufacture of flexible pipe. Tests indicated that Alathon 25 pipe had failure rates of 3% compared with 8% for the competition. Farmers purchased Alathon pipe as part of below-ground irrigation system. The common substitute for Alathon pipe was a pipe made of an off-grade resin selling for $6.5 per hundred feet. Labor cost of replacing a failed pipe is about $60. Pipe failures, if not detected quickly, can also damage crops. The damage could range from 0 (if the plants were mature) to $40 when vulnerable seedlings were washed out. Young, poorly rooted crops are in place approximately 20% of the time that the irrigation system is in use.

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i) What was the products economic value for the farmers?

ii) What if the failure rate is reduced from 7% to 1% (instead of 8% to 3%)?


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