Exam 3: Marginal Analysis for Optimal Decision Making

The marginal benefit and marginal cost functions for activity A are MB = 100 - 0.04A MC = 28 + 0.02A -The 1,400^th unit of A increases total benefit by $______ and total cost by $______ thereby _____________________ net benefit by $__________.

Activity A has the following marginal (MB) and marginal cost (MC) functions: MB = 2,500 - 20A MC = 500 + 30A where MB and MC are measured in dollars. -The 10^th unit of the activity increases total benefit by $_________ and increases total cost by $_________. Since marginal benefit is _________ (greater, less) than marginal cost, adding the 10^th unit of activity _________ (increases, decreases) net benefit by $_________.

Your firm sells club soda in both grocery stores and convenience stores. You have a budget of $550 for store displays, and must decide how to allocate this budget between grocery stores and convenience stores to maximize the total number of sales. The following table shows the total number of units that can be sold in grocery stores and convenience stores, according to the number of displays in each type of store. Displays in grocery stores cost $150 each and displays in convenience stores cost $100 each. -Suppose your firm can spend $1,200 on store displays. The total number of units sold will be maximized by choosing ______ displays in grocery stores and ______ displays in convenience stores. The maximum number of units that can be sold is ________.

Fill in the blanks in the following table. Then use the table to answer the questions:X -If X is increased from 3 to 4 units, total cost ___________ by $_________.

The next questions refer to the following: A clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. -If doctors make $80,000 a year and nurses make $40,000 a year, then