Suppose the marginal cost of writing a contract of length L is MC(L) = 10 + 4L. Find the optimal contract length when the marginal benefit of writing a contract is:

Instruction: Enter your responses rounded to two decimal places.

a. MB(L) = 120.

b. MB(L) = 160.

c. What happens to the optimal contract length when the marginal benefit of writing a contract increases?

multiple choice

• It decreases.
• It stays the same.
• It increases.