Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 10

Suppose that the total benefit and total cost from a continuous activity are, respectively, given by the following equations: B ( Q ) = 100 + 36 Q - 4 Q 2 and C ( Q ) = 80 + 12 Q. [Note: MB ( Q ) = 36 - 8 Q and MC ( Q ) = 12.]
a. Write out the equation for the net benefits.
b. What are the net benefits when Q = 1? Q = 5?
c. Write out the equation for the marginal net benefits.
d. What are the marginal net benefits when Q = 1? 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?