Economics for Managers

. Explain carefully, using the logic of marginal analysis, why A = 4 is not theoptimal level of activity A.c. Explain carefully, using the logic of marginal analysis, why A = 12 is notthe optimal level of activity A.d. Now calculate the net benefit for each level of A and tabulate the values inthe last column of the table. Inspect net benefit and determine the level ofA that maximizes net benefit.A * = __________.Is this the same value as in part a?3. A manager can spend $7,000 on two activities (X and Y) that generate benefits forthe firm. The price of X is $1,000 per unit and the price of Y is $2,000 per unit. Thetable below gives the total benefits for various levels of activities X and Y.Level ofActivity XTotal Benefit ofActivity XTotal Benefit ofActivity Y0 0 01 $ 30,000 $ 70,0002 55,000 110,0003 75,000 140,0004 90,000 164,0005 100,000 186,0006 105,000 206,000a. The optimal levels of activities X and Y when the manager faces a budgetconstraint of $7,000 are X * = ____________ and Y * = ____________. Thetotal benefit to the firm of engaging in the optimal levels of activities X and Yis $____________.b. Now let the budget increase to $17,000. The optimal levels of activities Xand Y when the manager faces a budget constraint of $17,000 are X * =___________ and Y * = ____________. The total benefit to the firm ofengaging in the optimal levels of activities X and Y is $____________.Chapter 3: Marginal Analysis for Optimal Decisions77