Consider the benefit and cost of Mr. T's Coffee Shop, which are indicated by the following: B(Q) = 50 + 18Q – 2Q2 and C(Q) = 40 + 6Q. Use this information to answer the following questions.
a. What is the marginal benefit, represented by MB(Q)?
b. What is the marginal cost, represented by MC(Q)?
c. At what level of output is the net benefit maximized?
a) B(Q) = 50 +18Q-2Q^2
MB = dB/dQ (50+18Q-2Q^2)
= 18 - 4Q
b) C(Q) = 40 +6Q
MC = dC/dQ (40 +6Q)
= 6
c) Maximization condition:
MB = MC
18 - 4Q = 6
12 = 4Q
Q = 12/4
= 3
Net benefit is maximized where output (Q) = 3
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