b) Complete the following table and answer the accompanying questions. notk a. A
ID: 1150341 • Letter: B
Question
b) Complete the following table and answer the accompanying questions. notk a. At what level of the control variable are net benefits maximized? b. What is the relation between marginal benefit and marginal cost at this level of the variable? Marginal Net Benefit Control Variable Total Tetal Cost Net Benefits Marginal Benent MBO Marginal Cost MNBO Benefits BiO 1200 950O210 MCO 100 101 102 103 104 105 106 107 108 109 110 1400 1590 1770 1940 2100 60 70 80 90 100 110 120 2250 2390 2520 130 140 150 160 2640 2750Explanation / Answer
A) We are given the value of total benefit and control variable. We will find the values of marginal benefit by finding the difference between the total benefit of the concerned unit of control variable and total benefit at the preceding unit of control variable. For example, the marginal benefit of 101th unit of control variable is = total benefit of 101th control variable - total benefit of 100th control variable. This gives MB (at 101 units of control variable) = 1400 - 1200 = 200. Do the same for remaining portions.
Now find the total cost. We now use the reverse method and find total cost from marginal cost. Use the fact that
TC (at 101) = TC (100) + MC (101)
= 950 + 70 = 1020.
Similarly TC (at 108) = TC (107) + MC (108) = 1650 + 140 = 1790
This is true because marginal cost is the difference between the total cost of producing current units and the total cost of producting the preceding units.
The level of control variable at which Net benefits are maximum is 107. NB is 740
B) MB is closest to MC and positive at this level which should be true for maximizing net benefit.
Control variable Total benefits Total costs Net benefuits Marginal benefits Marginal costs Net margial benefit 100 1200 950 250 210 60 150 101 1400 1020 380 200 70 130 102 1590 1100 490 190 80 110 103 1770 1190 580 180 90 90 104 1940 1290 650 170 100 70 105 2100 1400 700 160 110 50 106 2250 1520 730 150 120 30 107 2390 1650 740 140 130 10 108 2520 1790 730 130 140 -10 109 2640 1940 700 120 150 -30 110 2750 2100 650 110 160 -50Related Questions
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