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optimization of a contract length

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Suppose the marginal benefit of writing a contract is $60, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is:

a. MC(L) = 20 + 3L

MC(L) = 50 + 4L.

Instruction: Round your answers to 2 decimal places.

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The contract length is optimized when its marginal cost (MC) is ...

Solution Summary

The solution uses marginal cost and marginal benefit to find the optimal length of a contract.

$2.19