A Firm Sells Two Goods (X and Y)that Are Related

question 6

Multiple Choice

A firm sells two goods (X and Y) that are related in consumption.The estimated inverse demand and cost functions are: $$\begin{array} { l } P _ { X } = 105 - 0.5 Q _ { X } - 0.75 Q _ { Y } \\P _ { Y } = 120 - Q _ { Y } - 0.5 Q _ { X } \\M C _ { X } = 10 + 0.25 Q _ { X } \\M C _ { Y } = 16 + 0.5 Q _ { Y }\end{array}$$
What are the profit-maximizing levels of output for the two goods?

• A) \(Q _ { x }\) = 6, \(Q _ { Y }\) = 3
• B) \(Q _ { x }\) = 40, \(Q _ { Y }\) = 40
• C) \(Q _ { x }\) = 58, \(Q _ { Y }\) = 30
• D) \(Q _ { x }\) = 240, \(Q _ { Y }\) = 270
• E)none of the above

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Definitions:

Ricardian Advantage

A theory in economics that suggests countries should specialize in producing and exporting goods in which they have a relative productivity advantage.

Opportunity Cost

The sacrifice of gains that could have been obtained from alternative choices when one is selected.

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Human-powered, pedal-driven vehicles with two wheels attached to a frame, used for transportation, recreation, or sport.