1. Business
  2. Economics
  3. b at what level of the control variable are the...

Question: b at what level of the control variable are the...

Question details

(b) At what level of the control variable are the net benefits maximized? Explain. (c) What is the relationship between marginal benefit and marginal cost at the net benefits maximizing level of the control variable? Explain the justification for this relationship with an appropriate economic theory.
Assume that total benefit from a continuous decision, involving a control variable Q, is: TB(Q)-25Q-2.5Q2 and the associated total cost is: TC(Q)-5+ 4Q2 With the total benefit and total cost functions (equations) given above: (a) Estimate the value of total benefit when the control variable Q is 3. Clearly show (b) Estimate the marginal benefit when the control variable Q is 3. Clearly show your (c) Determine the level of control variable Q that maximizes total benefit. Clearly (d) Provide a justification that total benefit is maximized at your determined level of (e) Estimate the level of control variable Q that maximizes net benefits. Clearly show your steps and calculations steps and calculations show your steps and calculations. control variable Q in (c) above. your steps and calculations.
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution