An Airport Is Located Next to a Housing Development

question 2

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 20X - X ² and profits of the developer are 28Y - Y ² - 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 developer's profits.

• A)H₁ = 12 and H₂ = 14.
• B)H₁ = H₂ = 12.
• C)H₁ = 14 and H₂ = 13.
• D)H₁ = 14 and H₂ = 12.
• E)H₁ = 13 and H₂ = 17.

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Definitions:

Stockholder Profitability

The extent to which shareholders earn returns on their investments in a company through dividends and stock price appreciation.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Intercompany Comparisons

Intercompany comparisons involve analyzing and evaluating the financial performance and strategies of different entities within the same group or company to identify discrepancies and opportunities for optimization.

Vertical Analysis

A financial analysis method that compares line item amounts on a financial statement to a base figure to determine each item’s relative size or contribution to the whole.