An Airport Is Located Next to a Housing Development

question 24

Multiple Choice

An airport is located next to a housing development. Where X is the number of planes that land per day and Y is the number of houses in the housing development, profits of the airport are 28X - X² and profits of the developer are 20Y - Y² - XY. Let H₁ be the number of houses built if a single profit-maximizing company owns the airport and the housing development. Let H₂ be the number of houses built if the airport and the housing development are operated independently and the airport has to pay the developer the total "damages" XY done by the planes to the profits of the developer.

• A) H₁ = H₂ = 4.
• B) H₁ = 4 and H₂ = 10.
• C) H₁ = 10 and H₂ = 4.
• D) H₁ = 6 and H₂ = 9.
• E) H₁ = 9 and H₂ = 13.

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Definitions:

Advertising Expense

A cost incurred by a business to promote its products, services, or brand names.

Indirect Materials

Materials that are used in the production process but are not directly traceable to a finished product, such as lubricants and cleaning supplies used in a manufacturing facility.

Prime Cost

The combined direct costs of manufacturing a product, specifically direct materials and direct labor.

Plant Janitor's Wages

The compensation paid to janitorial staff responsible for cleaning and maintaining industrial or manufacturing facilities.