Suppose the total benefit derived from a continuous decisions, Q, is B(Q) = 20Q − 2Q...

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Suppose the total benefit derived from a continuous decisions, Q, is B(Q) = 20Q − 2Q...

Suppose the total benefit derived from a continuous decisions, Q, is B(Q) = 20Q − 2Q and the 2 total cost from deciding Q is C(Q) = 4Q + 2Q . The marginal benefit (MB) and marginal cost (MC) 2 is the first order derivative of these functions. MB(Q) = 20 − 4Q and MC(Q) = 4 + 4Q .

(6) (4 points) What level of Q minimizes total cost?

business economics

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Answer 1

Answer #1

Cost is minimised at MB=MC that is where marginal benefit is equal to marginal cost

20-4Q= 4+4Q

16= 8Q

Q= 2

Q=2 minimises cost

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Answer 2

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