Suppose that the total benefit and total cost from an activity are, respectively

Question

Suppose that the total benefit and total cost from an activity are, respectively, given by the following equations: B(Q)=150+28Q-5Q(squared) and C(Q)=100+8Q. (Note:MB(Q)=28-10Q and MC(Q)=8.)

a. write out the equation for net benefits.

b. what are the net benefits when Q=1? Q=5.

c. write out the equation for the marginal net benefits.

d. what are the marginal net benefits when Q=1? Q=5.

e. what level of Q maximizes net benefits?

f. at the value of Q that maximizes net benefits, what is the value of marginal net benefits?

Explanation / Answer

a) Q = 60 - 7*P

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