Suppose a firm is considering two different activities, X and Y, which yield the total benefits presented in the schedule below. The price of X is $2 per unit, and the price of Y is $10 per unit.

a. The firm places a budget constraint of $26 on expenditures on activities X and Y. What are the levels of X and Y that maximize total benefit subject to the budget constraint?

b. What is the total benefit associated with the optimal levels of X and Y in part a?

c. Now let the budget constraint increase to $58. What are the optimal levels of X and Y now? What is the total benefit when the budget constraint is $58?

Transcribed Image Text:

Level of activity 0 1 2 3 نیا 4 5 6 Total benefit of activity X (TBx) SO 30 54 72 84 92 98 Total benefit of activity Y (TBY SO 100 190 270 340 400 450 Level of activity 0 1 2 3 نیا 4 5 6 Total benefit of activity X (TBx) SO 30 54 72 84 92 98 Total benefit of activity Y (TBY SO 100 190 270 340 400 450

Answer rating: 100% (QA)

Level of activity TB of X MB of X MBxPx TB of Y MB ... View the full answer