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Solve for the optimal contract length

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Reference no: EM131457274

Your firm wants to write a contract with a supplier to purchase inputs. The marginal benefit of the contract is: MB(L) = 20 - L, while the marginal cost is: MC(L) = 3L. Draw the MB and MC curves on the graph below. Solve for the optimal contract length (x), and indicate this value below.

X is the years and

Y is the $

Reference no: EM131457274

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