Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By comparing marginal benefit to marginal cost
B
By analyzing total revenue trends
C
By considering historical price changes
D
By evaluating competitors' pricing strategies
Understanding the Answer
Let's break down why this is correct
Answer
In a competitive market, a consumer decides how much of a good to buy by comparing the marginal benefit to the price of the good. Marginal benefit is the extra satisfaction or value a consumer gets from consuming one more unit of a product. When the price of the good is equal to the marginal benefit, the consumer is at market equilibrium, meaning they are making the best choice for their money. For example, if a consumer finds that buying one more slice of pizza gives them a satisfaction of $3 and the price of the slice is also $3, they will buy that slice because the benefit matches the cost. If the marginal benefit is less than the price, they would choose not to buy that extra slice, as it wouldn’t be worth it.
Detailed Explanation
Consumers look at the extra benefit they get from buying one more item. Other options are incorrect because Some might think looking at total revenue is helpful; Considering past price changes can be misleading.
Key Concepts
decision-making
market equilibrium
Topic
Marginal Benefit Calculation
Difficulty
medium level question
Cognitive Level
understand
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