Regime 2: Lawyer's paradise Suppose that a law is passed that makes the airport liable for all damages to the developer's property values. If the airport flies X planes and the developer builds Y houses, the damages, as reflected in developer's profit function, is XY. With this new law, the airports profits after it has paid damages will be 36X-X2-XY. The developer's profits including the amount he receives in payment of damages will be 48Y-Y2-XY+XY = 48Y - Y² Under this regime, what is the umber of houses that maximises the developer's profits? Y Compute the developer's profits. TD If Y = Y, what is the number of planes per day that maximises profits for the airport? X = Compute the airport's profits. TA Regime 3: Merger Suppose that the housing developer purchases the airport. To maximise the sum of profits, how many houses should the developer build and how many planes should the developer let land? Xº Yo Compute the total profits. Tmerged

Regime 2: Lawyer's paradise Suppose that a law is passed that makes the airport liable for all damages to the developer's property values. If the airport flies X planes and the developer builds Y houses, the damages, as reflected in developer's profit function, is XY. With this new law, the airports profits after it has paid damages will be 36X-X2-XY. The developer's profits including the amount he receives in payment of damages will be 48Y-Y2-XY+XY = 48Y - Y² Under this regime, what is the umber of houses that maximises the developer's profits? Y Compute the developer's profits. TD If Y = Y, what is the number of planes per day that maximises profits for the airport? X = Compute the airport's profits. TA Regime 3: Merger Suppose that the housing developer purchases the airport. To maximise the sum of profits, how many houses should the developer build and how many planes should the developer let land? Xº Yo Compute the total profits. Tmerged

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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