Question

Level of Total Marginal Net Activity Benefit Cost Benefit Cost Benefit

_____         0           xx           xx             0

200               30          _____                   _____                   _____      

_____       _____                   100        _____                   230

_____       _____                   _____                   50           270

450               _____                   _____                   65           _____       

_____       255        30           _____                   _____       

500               _____                   _____                  75           _____       

Please answer the following three questions referred to the table: a. What is marginal benefit for the 4^thunit of the activity?

What is the net benefit of the 5^th unit of the activity?

What is the optimal level of activity?

please show the formulas used to solve the chart as well

Answer 1

Activity	total benefit(net benefit+total cost)	total cost(total benefit-net benefit)	marginal benefit(change in TB/CHANGE IN ACTIVITY)	marginal cost(Change in TC/change in activity)	net benefit(TB-TC)
0	-----	0	XX	XX	0
1	200	30	200	30	170
2	300	70	100	40	230
3	390	120	90	50	270
4	450	185	60	65	265
5	480	255	30	70	225
6	500	330	20	75	170

1. Marginal benefit for the 4th unit of activity is 60
2. The net benefit of the 5th unit of activity is 225.
3. Optimal level of activity is 3 because here the net benefit is highest.
4. Formulas are given in the table above.