Consider a honey farm located next to an apple orchard. The cost function of the honey farm iscH(H)=H2

and the marginal cost of honey isMCH(H)=2H

, where H is the amount of honey. The cost function of the apple orchard iscA(A,H)=A2AH

, and its marginal cost of apples isMCA(A)=2AH

, where A is the amount of apples. The price of honey ispH=2

, and the price of apples ispA=2

. If the firms stayed separate, by how much the honey production would have to be subsidized to induce the socially optimal honey supply?

Group of answer choices

1

6

neither one is correct

2

12