Question

Number of droids	Output of moisture (barrels per month)
0	0
1	30
2	55
3	75
4	90
5	100

Luke Skywalker's Uncle Owen operates a moisture farm on the planet Tatooine. The moisture farm utilizes droids as a resource to produce the moisture. Owen's production function is given in the accompanying table. If the price of a barrel of moisture is 30 Republic Credits and a droid costs 400 Republic Credits per month to rent, how many droids should Owen rent?

Answer 1

Number of droids	Output of moisture (barrels per month)	Marginal product of droids	MRP of Droids
0	0
1	30	30	900
2	55	25	750
3	75	20	600
4	90	15	450
5	100	10	300

Owen should rent 4 droids.

When 4 droids are taken on rent, then MRP of 4rth droid is 450 republic credit that is higher than the rent of droid that is 400 republic credit. When the number of droid is increased from 4 to 5, then MRP of 5^th droid comes down to 300 republic credit that is less than the rent amount of 400 republic credit. It creates losses to Owen. Hence, it means that rent of 4 number of droid is the best choice for Owen.