Explore BrainMass
Share

Explore BrainMass

    optimization of a contract length

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com October 10, 2019, 7:32 am ad1c9bdddf
    https://brainmass.com/economics/pricing-output-decisions/optimization-of-a-contract-length-585779

    Solution Preview

    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