When the marginal cost of writing a contract declines

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Reference no: EM131165344

Suppose the marginal benefit of writing a contract is $50, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is:

Instruction: Round your answers to 2 decimal places.

a. MC(L) = 40 + 3L. _____________________

b. MC(L) = 20 + 2L. ________________

c. What happens to the optimal contract length when the marginal cost of writing a contract declines? 1) It stays the same? 2) It increases? 3) It decreases?

Reference no: EM131165344

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