A Firm Makes Two Products, Y and Z

question 55

Multiple Choice

A firm makes two products, Y and Z. Each unit of Y costs $10 and sells for $40. Each unit of Z costs $5 and sells for $25. If the firm's goal were to maximize profit, the appropriate objective function would be

• A) maximize $40Y = $25Z.
• B) maximize $40Y + $25Z.
• C) maximize $30Y + $20Z.
• D) maximize 0.25Y + 0.20Z.
• E) maximize $20Y + $50Z.

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Definitions:

Nominal GDP

A measure of a country's economic output based on current prices, without adjusting for inflation.

Equation of Exchange

The equation of exchange is an economic formula relating the supply of money in an economy to the velocity of money, price level, and an index of expenditures.

Velocity of Money

The rate at which money circulates in the economy, calculated as the ratio of nominal GDP to the money supply.

Real GDP

Real Gross Domestic Product, which adjusts the total value of all produced goods and services within an economy in a year for the effects of inflation, showing the real terms of economic output.