In Problem 2, Suppose That the Cost Function of the Honey

question 17

Multiple Choice

In Problem 2, suppose that the cost function of the honey farm is C_H(H, A) = - 2A and the cost function of the apple orchard is C_A(H, A) = , where H and A are the number of units of honey and apples produced respectively. The price of honey is $5 and the price of apples is $4 per unit. Let A₁ be the output of apples if the firms operate independently, and let A₂ be the output of apples if the firms are operated by a profit-maximizing single owner.

• A) A₁ = 200 and A₂ = 300.
• B) A₁ = A₂ = 200.
• C) A₁ = 100 and A₂ = 200.
• D) A₁ = 150 and A₂ = 200.
• E) A₁ = 250 and A₂ = 200.

---

Definitions:

Consumer Equilibrium

The point at which the amount of a product demanded by consumers equals the amount supplied, leading to a stable market price.

Utility Maximization

The process by which individuals choose consumption combinations that maximize their satisfaction or utility under given constraints.

Income

The financial gain or money received by an individual or entity, usually through employment, investment, or business ventures.

Consumer Equilibrium

Consumer Equilibrium is the state at which the allocation of goods and services by a consumer ensures the maximum utility given their budget constraints.