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.

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Present Value

The assessed current worth of a future money amount or cash flow series, using an established rate of return.

Interest Rate

The cost of borrowing money, often expressed as a percentage of the amount lent.

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