Question

1. Based on the table, answer the following questions.

(1)	(2)	(3)	(4)	(5)	(6)	(7)
Control Variable Q	Total Benefits B(Q)	Total Costs C(Q)	Net Benefits N(Q)	Marginal Benefit MB(Q)	Marginal Costs MC(Q)	Marginal Net Benefit MNB(Q)
Given	Given	Given	(2) - (3)	(2)/(1)	(3)/(1)	(5)-(6)
0	0	0
1	90	10
2	170	30
3	240	60
4	300	100
5	350	150
6	390	210
7	420	280
8	440	360
9	450	450
10	450	550

1. _{Complete the table above.}
2. _{At what level of the control variable are net benefits maximized?}

Answer 1

(a)

Net benefits is calculated as follows -

Net benefits = Total benefits - Total costs

Marginal benefits is calculated as follows -

Marginal benefits = Change in total benefit/Change in control variable

Marginal cost is calculated as follows -

Marginal cost = Change in total cost/Change in control variable

Marginal net benefit is calculated as follows -

Marginal net benefit = Marginal benefit - Marginal cost

Based on the above formula, following is the complete table -

Control variable	Total benefits	Total costs	Net benefits	Marginal benefits	Marginal cost	Marginal net benefits
0	0	0	-	-	-	-
1	90	10	80	90	10	80
2	170	30	140	80	20	60
3	240	60	180	70	30	40
4	300	100	200	60	40	20
5	350	150	200	50	50	0
6	390	210	180	40	60	-20
7	420	280	140	30	70	-40
8	440	360	80	20	80	-60
9	450	450	0	10	90	-80
10	450	550	-100	0	100	-100

(b)

Net benefits are maximized at that level of control variable corresponding to which marginal net benefit is zero.

The marginal net benefit is zero corresponding to 5 control variable.

So,

The level of the control variable at which net benefit are maximized is 5 control variable.