Class exercise2&3

Class exercise2&3 - The total benefit ( TB ) and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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 $__________.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

This note was uploaded on 10/02/2011 for the course MGE 429041 taught by Professor Isseyteh during the Spring '10 term at SUNY Buffalo.

Page1 / 2

Class exercise2&3 - The total benefit ( TB ) and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online