Consider a firm wishing to use the services of a consultant. The marginal benefit for the firm is given by MB = 120 – q, where q is the quantity of services provided. The marginal cost of those services for the consultant is given by MC = 2q. The issue for the parties is that it is difficult to verify the actual quantity of consulting services provided. To help mitigate this the firm can hire an auditor at a cost of $100. Similarly, the consultant can use some recording keeping techniques that cost $200. Even with both of these actions, if the consultant provides less than 60 units of the service it will look like zero quantity was provided to a third party (like a court enforcing the contract). What is the total agency cost in this case? Using the help of a diagram, explain your answer. What if the auditing service instead cost the firm $1000 and the record keeping technology cost the consultant $1000 – what would the total agency cost be in this case? Explain your answer

Consider a potential trading relationship between a law firm and a business client. The marginal cost of production for the law firm is given by MC = 2q, where q is the quantity of legal services provided. The demand curve for the client is MB = 150 – q. Note, however, that it is difficult to ascertain how many unit of legal service are actually provided. To (partially) remedy this, the law firm can adopt a recording system at a cost of $150. Similarly, for $150 the client can implement an auditing system to try to verify the number of legal services actually provided by the law firm. However, even if both firms implement the auditing and recording systems, only 30 units of legal services will actually be traded. What is the total agency cost? a. $800 b. $900 c. $1000 d. $1100 e. None of the above

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager shouldGroup of answer choicesrent the room because the marginal benefit exceeds the average cost.not rent the room because the marginal benefit is less than the marginal cost.not rent the room because the marginal benefit is less than the average cost.rent the room because the marginal benefit exceeds the marginal cost.

Marginal costing is a technique that focuses on the:a.Calculation of total costsb.Analysis of fixed costsc.Separation of variable costs from fixed costsd.Determination of profit margins

A Chartered accountant in practice issued a certificate showing original cost ofplant and machinery installed in premises of a client for Rs. 9 crores to save someregulatory fees for his client. However, original cost of plant and machinery wasRs.15 crore as per records of client. Which fundamental principle governingprofessional ethics is violated in this case

What is marginal cost equal to when Q = 10?