Calculating an Indifferent Counter-Offer
A landowner and a tenant farmer are negotiating a contract. The landowner's income (economic rent) is the total harvest minus the amount the tenant receives. The relationship between the tenant's work hours and the total harvest is shown in the table below.
| Hours Worked | Total Harvest (Bushels) |
|---|---|
| 12 | 50 |
| 16 | 62 |
| 20 | 70 |
| 24 | 75 |
The landowner's initial offer, Allocation N, is for the tenant to work 20 hours and receive 40 bushels of grain. The tenant wishes to make a counter-offer, Allocation R, where she works only 16 hours.
For the landowner to be indifferent between accepting Allocation N and Allocation R, how many bushels of grain must the tenant receive in Allocation R? Show your calculation.
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