Suppose you can hire a mechanic to work on your car for up to six hours. The tot

Question

Suppose you can hire a mechanic to work on your car for up to six hours. The total benefit of repair work is B(H) = 654H 40H2 and the total cost is C(H) = 110H + 24H2 , where H is the number of hours. The marginal benefit is MB(H) = 654 80H and the marginal cost is MC(H) = 110 + 48H. What is your best choice?

Suppose you can hire a mechanic to work on your car for up to six hours. The total benefit of repair work is B(H) 654H - 40H2 and the total cost is C(H) 110H + 24H, where H is the number of hours. The marginal benefit is MB(H) 654-80H and the marginal cost is MC(H) = 110+48H. What is your best choice?

Explanation / Answer

At optimal,

MB(H) = MC(H)

654-80H = 110 + 48H

H = 544 / 128 = 4.25

Thus, H = 4.25 is the best choice.

Thanks!

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