📚 Learning Guide
Marginal Benefit Calculation
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In a competitive market, how does a consumer determine the optimal quantity of a good to purchase based on marginal benefit and market equilibrium?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose 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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