Question

Equations and Graphs Part 4. Economic 1 Suppose the marginal costs (MC) af reading are constant& the marginal benofits (MB) 3. Jim coukd undertake actvity X but chooses not to. Draw the marginal beneft ot eading dedne (over tne) nitially. the MB of Reading are greaker than the MC and cost curves for acivity X from Jim's perspective. (Draw the marginal cost Draw the MB curve and MC curve of studying. & identily the efficient amount of curve as upward sloping or horizontal but definitely above a declining reading. Then explain why the elficient point is the point at which the net beselits of reading are maximized marginal benefit curve).

Answer 1

TC = 20 + 3 times Q^2 + 5 Q MC = partial differential TC/ partial differential Q = 6 Q + 5 MC at Q = 10 is given by = 6 times 10 + 5 = 60 + 5 = $ 65 4) In the diagram above, MB represents marginal benefit from reading and MC represents marginal cost of reading. The efficient amount of reading occurs at point E where marginal benefit is equal to marginal cost of reading. Net benefit from reading = Total benefit - total cost To maximize net benefit, differentiate it with respect to quantity: partial differential TB/ partial differential R - partial differential TC/ partial differential R = 0 (partial differential TB/ partial differential R = MB partial differential TC/ partial differential R = MC) Also, at Q_1, marginal benefit > marginal cost, thus amount reading should be increased. At Q_2, MC > MB, thus reading should be declined until MB = MC