Question

Complete the following table and answer the accompanying questions Contral total Cost C( Benefits N(O) Benefit MC Marginal Ret BeneFit MNB MC 1,209 1,400 1,590 10e 101 102 103 104 105 106 107 108 109 950 210 60 80 1,940 2,100 2,250 2,390 2,520 2.640 2,750 100 110 120 130 140 150 166 110 a. At what level of the control variable are net benefits maximized? b. What is the relation between marginal benefit and marginal cost at this level of the variable? Marginal cost is slightly larger than marginal beneft. Marginal cost is much smaller than marginal benefit Marginal cost is much larger than marginal benefit Marginal cost is slightly smaller than marginal benefit.

Answer 1

Answer:

C(Q)=C(Q-1)+MC(Q)

N(Q)=B(Q)-C(Q)

MB(Q)=B(Q)-B(Q-1)

MNB(Q)=MB(Q)-MC(Q)

For Q=101

C=950+70=1020

N=1400-1020=380

MB=1400-1200=200

MNB=200-70=130

Q	B	C	N	MB	MC	MNB
100	1200	950	250	210	60	150
101	1400	1020	380	200	70	130
102	1590	1100	490	190	80	110
103	1770	1190	580	180	90	90
104	1940	1290	650	170	100	70
105	2100	1400	700	160	110	50
106	2250	1520	730	150	120	30
107	2390	1650	740	140	130	10
108	2520	1790	730	130	140	-10
109	2640	1940	700	120	150	-30
110	2750	2100	650	110	160	-50

:

A) From Above table we found net benefit maximize at Q=107 and Maximum Net benefit N=740

B) Option C:Marginal Cost is slightly smaller than marginal Benefit

Since Marginal cost at Q=107 is 130 and Marginal Benefit is 140