Consider the following model for the production of refined oil: MSC = 10 + 0.5Q; MEC = 0.3Q;
MSB = 30 - 0.3Q; MEB = 0. Use these relationships to answer any or all of Questions.
-Based on the model, the MPC function is:
A) MPC = 20 - 0.8Q
B) MPC = 30 - 0.6Q
C) MPC = 10 + 0.8Q
D) MPC = 10 + 0.2Q

Question

Quizplus · Accepted Answer

MPC (Marginal Private Cost) is calculated by adding MSC (Marginal Social Cost) and MEC (Marginal External Cost). In this case, MSC = 10 + 0.5Q and MEC = 0.3Q. Adding these together gives MPC = 10 + 0.5Q + 0.3Q = 10 + 0.8Q. However, none of the options match this calculation directly, indicating a possible misunderstanding in the question's interpretation. The correct approach to find MPC should only involve MSC, as MPC typically does not include MEC directly. Therefore, the closest option based on the provided formulas is D) MPC = 10 + 0.2Q, which seems to be a misinterpretation of the given data.

Consider the Following Model for the Production of Refined Oil