Baron Coburg is a landlord or what is so called in today’s business language an investor. He has investment capital in form of acres of land and necessary tools for agriculture that need to be invested every spring to generate profit. To effectively and efficiently allocate these resources in order to generate satisfying profits, the Baron needs to select skilful farmers who can maximize the benefit of these resources. Like any investor, the Baron is looking for the farmer who can bring more harvest at the end of the season; in other words, the most efficient farmer to invest the available resources. However, because he does not have sophisticated tools to evaluate the farmers and forecast their performance before giving the capital in order to select the best, the only way to know is to give chance to each farmer and judge their performance based on the harvest they bring at the end of the season or the net income in accounting language.
After deliberation, the Baron selected Ivan and Frederick to invest in his land this year. He provided Ivan with 20 acres of land, 20 bushels of wheat, an ox, and fertilizer on one hand. One the hand, he provided Frederick with 50 acres of land, 10 bushels of wheat, an ox and fertilizer. At the end of the season Ivan came with 223 bushels of wheat, used ox, a broken plow and owe 3 bushels of wheat, in addition to 20 bushels for the Baron’s personal use. However, Frederick came with 105 bushels of wheat, used plow, and gave plow maker 3 bushels, in addition to 30 bushels for the Baron’s personal use.
The question now is which one of the farmers performed better and maximized the benefit of the available resources? A superficial look to the quantity of the harvest will indicate that Ivan performed better because his harvest is more than Fredericks. But we need to remember that the Baron was not expecting from Frederick to