Question

A	TOTAL BENEFIT	TOTAL COST	MARGINAL BENEFIT	MARGINAL COST	NET BENEFIT
0	0	_____	XX	XX	0
1	_____	_____	100	_____	80
2	_____	50	90	_____	_____
3	250	_____	_____	40	_____
4	_____	_____	_____	60	150
5	340	220	_____	_____	_____

What is marginal benefit for the 4th unit of the activity?
The optimal level of activity is:
What is the net benefit of the 5th unit of the activity?

Answer 1

A	TB	TC	MB = ∆TB/∆A	MC = ∆TC/∆A	NB = TB - TC
0	0	0	XX	XX	0
1	100 [i.e., 0 + 100]	20 [i.e., 100 - 80]	100	20 [i.e., 20 - 0]	80
2	190 [i.e., 100 + 90]	50	90	30 [i.e., 50 - 20]	140 [i.e., 190 - 50]
3	250	90 [i.e., 50 + 40]	60 [i.e., 250 - 190]	40	160 [i.e., 250 - 90]
4	300 [i.e., 150 + 150]	150 [i.e., 90 + 60]	50 [i.e., 300 - 250]	60	150
5	340	220	40 [i.e., 340 - 300]	70 [i.e., 220 - 150]	120[i.e., 340 - 220]

MB of 4th unit of activity is 50.

The optimal level of activity is 3.The optimal level of activity is where MB is equal to or greater than MC. From the table it is seen that the optimal level of activity is 3. Because at 3rd unit activity MB > MC.

The net benefit of the 5th unit of the activity 120.