Item5

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Item 5

Suppose that the total benefit and total cost from a continuous activity are, respectively, given by the following equations: B(Q) = 100 + 36Q 4Q² and C(Q) =80 + 12Q. (Note: MB(Q) = 36 8Q and MC(Q) = 12.) Instructions: Use a negative sign () where appropriate. a. Write out the equation for the net benefits.

N(Q) = + Q + Q²

b. What are the net benefits when Q = 1? Q = 5? Net benefits when Q = 1:

Net benefits when Q = 5: c. Write out the equation for the marginal net benefits.

MNB(Q) = + Q

d. What are the marginal net benefits when Q = 1? Q = 5? Marginal net benefits when Q = 1:

Marginal net benefits when 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?