📚 Learning Guide
Marginal Cost and Benefit Analysis
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In marginal cost and benefit analysis, the decision to pursue an additional unit of a good or service should be based on whether the marginal ______ exceeds the marginal cost.

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

cost

B

benefit

C

utility

D

revenue

Understanding the Answer

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Answer

In marginal cost and benefit analysis, the decision to pursue an additional unit of a good or service should be based on whether the marginal benefit exceeds the marginal cost. This means that you should only produce or consume one more unit if the satisfaction or value you gain from it is greater than what it costs to produce or acquire it. For example, if you are considering buying one more slice of pizza, you should think about how much enjoyment that slice will bring you compared to the price you have to pay. If the happiness you get from the pizza is worth more than the cost, then it makes sense to go ahead with the purchase. On the other hand, if the cost is higher than the benefit, it would be better not to buy that extra slice.

Detailed Explanation

You should only produce more if the extra benefit is greater than the extra cost. Other options are incorrect because Some might think that if the extra cost is low, it's okay to produce more; Utility means satisfaction or happiness.

Key Concepts

Marginal Cost Analysis
Marginal Benefit Analysis
Resource Allocation
Topic

Marginal Cost and Benefit Analysis

Difficulty

medium level question

Cognitive Level

understand

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