Question

Suppose the marginal benefit of writing a contract is $ 100, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is:
a. MC (L) = 30 + 4L.
b. MC (L) = 40+ 5L.
c. What happens to the optimal contract length when the marginal cost of writing a contract declines?



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  • CreatedApril 18, 2014
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