📚 Learning Guide
Marginal Benefit Calculation
easy

What happens to the marginal benefit when the marginal cost of producing an additional unit increases?

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Learning Path

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Choose the Best Answer

A

It increases

B

It decreases

C

It remains the same

D

It becomes negative

Understanding the Answer

Let's break down why this is correct

Answer

When the marginal cost of producing an additional unit increases, the marginal benefit often decreases. This is because individuals and businesses want to make sure that what they gain from producing and consuming something is worth more than what it costs to produce it. For example, if a factory finds that it costs more to make one extra toy, they might not feel it is worth it unless they can sell that toy for a higher price. As the cost rises, the benefit they expect to receive may not be enough to justify the expense, leading them to produce less. Therefore, when marginal costs go up, it can lead to a decrease in the willingness to produce more units, as the added benefit does not match the higher cost.

Detailed Explanation

When the cost to make one more item goes up, the extra benefit we get from it usually goes down. Other options are incorrect because Some might think that higher costs mean higher benefits; It's a common mistake to think that benefits stay the same no matter the cost.

Key Concepts

marginal cost
Topic

Marginal Benefit Calculation

Difficulty

easy level question

Cognitive Level

understand

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