mgr econ 6

# mgr econ 6 - Activity A has the flowing marginal benefit...

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Activity A has the flowing marginal benefit (MB) and marginal cost (MC) functions: MB = 10 – 0.05A and MC = 2 + 0.05A where MB and MC are measured in dollars. a. The 70 th unit of activity increases total benefit by \$___ \$6.50_____ and increases total cost by \$___ \$5.50_____. Since marginal benefit is ___ greater__ _____ ( greater, less) than marginal cost, adding the 70 th unit of the activity ___ increases_______ ( increases, decreases) net benefit by \$___\$1.00_____. MB=10-0.05(70) MC=2+0.05(70) MB=10-3.50 MC=2+3.50 MB=\$6.50 MC=\$5.50 6.50-5.50=\$1.00 b. The 110 th unit of activity A increases total benefit by \$_ 4.50_______ and increases total cost by \$_____7.50___. Since marginal benefit is ___ less_______ (greater, less) than marginal cost, adding the 110 th unit of the activity __ decreases________ (increases, decreases) net benefit by \$_ 3.00_______. MB=10-0.05(110) MC=2+0.05(110) MB=10-5.50 MC=2+5.50 MB=\$4.50 MC=\$7.50 7.50-4.50=\$3.00 c. The optimal level of activity A is ___ _80____ units. At the optimal level of

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## This note was uploaded on 04/14/2010 for the course ECON 2345 taught by Professor Jamison during the Spring '10 term at York University.

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mgr econ 6 - Activity A has the flowing marginal benefit...

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