Suppose that Bill,George,and Al constitute the entire market for consumers of national defense.Each man has an identical demand curve for national defense,which can be expressed as Suppose that the marginal cost for national defense can be expressed as What is the optimal quantity of national defense?

Question

Suppose that Bill,George,and Al constitute the entire market for consumers of national defense.Each man has an identical demand curve for national defense,which can be expressed as  Suppose that the marginal cost for national defense can be expressed as  What is the optimal quantity of national defense?

Quizplus · Accepted Answer

To find the optimal quantity of national defense we need to equate the marginal cost of national defense to the marginal benefit (i.e., the demand curve) of the last unit of national defense produced. Solving the equation MC = MB for quantity gives:
4Q = 620 - 20P
Q = (620 - 20P)/4
Substituting the demand curve (P = 31 - Q/10) into the equation for quantity gives:
Q = (620 - 20(31 - Q/10))/4
Q = 40
Therefore, the optimal quantity of national defense is 40 units.

Suppose That Bill,George,and Al Constitute the Entire Market for Consumers