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

In Problem 2, suppose that the cost function of the honey farm is C_H(H, A) = - 3A 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 $7 and the price of apples is $5 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 = 125 and A₂ = 250.
B) A₁ = A₂ = 250.
C) A₁ = 200 and A₂ = 250.
D) A₁ = 250 and A₂ = 400.
E) A₁ = 350 and A₂ = 250.

Correct Answer:

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