An Apiary Is Located Next to an Apple Orchard

question 39

Multiple Choice

An apiary is located next to an apple orchard.The apiary produces honey and the apple orchard produces apples.The cost function of the apiary is C_H(H, A) = H ²/100 - 3A and the cost function of the apple orchard is C_A(H, A) = A²/100, where H and A are the number of units of honey and apples produced respectively.The price of honey is $2 and the price of apples is $7 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 single owner so as to maximize total profit.

• A)A₁ = A₂ = 350.
• B)A₁ = 250 and A₂ = 350.
• C)A₁ = 175 and A₂ = 350.
• D)A₁ = 350 and A₂ = 500.
• E)A₁ = 100 and A₂ = 350.

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Definitions:

Demand Curve

A graph illustrating how much of a given product a household would be willing to buy at different prices.

Perfectly Competitive

An economic model where numerous buyers and sellers exist, there's unrestricted entry and exit, and the product offered is uniform.

Market Price

The present cost at which a product or service is available for purchase or sale in the marketplace.

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.