Marginal cost of writing a contract of length

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Suppose the marginal benefit of writing a contract is $70, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is:

Instruction: Enter your responses rounded to two decimal places.

a. MC(L) = 40 + 2L.

b. MC(L) = 20 + 5L.

c. What happens to the optimal contract length when the marginal cost of writing a contract declines?

(Click to select)

It decreases.

It stays the same.

It increases.

Reference no: EM132492560

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