To maximize net benefits in the above table it is most appropriate to use
A)four units of the control variable, since the marginal benefit exceeds marginal cost.
B)six units of the control variable, since the marginal cost exceeds marginal benefit.
C)five units of the control variable, since net marginal benefits are zero.
D)none of the statements associated with this question are correct.

Question

Quizplus · Accepted Answer

The net marginal benefit is the difference between marginal benefit and marginal cost. At four units of control variable, the marginal benefit is 60 and the marginal cost is 50, resulting in a net marginal benefit of 10. At six units of control variable, the marginal benefit is 30 and the marginal cost is 80, resulting in a net marginal cost of -50. At five units of control variable, the marginal benefit is 40 and the marginal cost is also 40, resulting in a net marginal benefit of 0. Therefore, to maximize net benefits, five units of the control variable should be used.

To Maximize Net Benefits in the Above Table It Is