7 Imagine you have a benefit curve BQ60004Q2 and a cost curv

7. Imagine you have a benefit curve B(Q)-6000-4Q2 and a cost curve C(Q) level of Q that will maximize the net benefits? a. 25 b. 35 c. 50 d. 75 8Q2. What is t he

Solution

Option (a).

Net benefit, NB(Q) = B(Q) - C(Q) = 600Q - 4Q² - 8Q²

NB(Q) = 600Q - 12Q²

Net benefit is maximized when dNB(Q)/dQ = 0

dNB(Q)/dQ = 600 - 24Q

600 - 24Q = 0

24Q = 600

Q = 25