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Class exercise2&amp;3

# Class exercise2&amp;3 - The total benefit TB and total...

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Class exercise 1: Activity A has the following marginal ( MB ) and marginal cost ( MC ) functions: MB = 2,500 - 20 A MC = 500 + 30 A where MB and MC are measured in dollars. a. The 10 th unit of the activity increases total benefit by \$_________ and increases total cost by \$_________. Since marginal benefit is _________ (greater, less) than marginal cost, adding the 10 th unit of activity _________ (increases, decreases) net benefit by \$_________. b. The 50 th unit of the activity increases total benefit by \$_________ and increases total cost by \$_________. Since marginal benefit is _________ (greater, less) than marginal cost, subtracting the 50 th unit of activity _________ (increases, decreases) net benefit by \$_________. c. The optimal level of the activity is ________ units. At the optimal level of activity, marginal benefit is \$_________ and marginal cost is \$__________.

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Unformatted text preview: The total benefit ( TB ) and total cost ( TC ) functions for the activity are: TB = 2,500 A-10 A 2 TC = 500 A + 15 A 2 where TB and TC are measured in dollars. 1 d. For the optimal level of the activity in part c , the total benefit is \$_________, the total cost is \$_________, and the net benefit is \$__________. Class exercise 2: Under the total revenue and total cost approach to profit maximization, a. firms equate total cost and total revenue in order to maximize profit b. the profit-maximizing output level is equivalent to the total revenue-maximizing output level c. when total costs are minimized, profits are maximized d. firms choose the output level where TR - TC is greatest e. total cost must always exceed total revenue in the long run 2...
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Class exercise2&amp;3 - The total benefit TB and total...

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