Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Marginal benefits must always exceed marginal costs for a decision to be considered efficient.
B
A decision can be justified if the marginal benefit is equal to the marginal cost.
C
Ignoring marginal costs can lead to suboptimal resource allocation.
D
Marginal cost analysis focuses solely on fixed costs rather than variable costs.
E
Evaluating marginal benefits helps in understanding the trade-offs involved in resource allocation.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal cost and benefit analysis is a way to make smart economic decisions by comparing the extra costs and extra benefits of a choice. When you think about a decision, you look at what it will cost you to do one more unit of something, like producing one more toy, and what you will gain from it, such as the money you earn from selling that toy. If the benefit of making the toy is greater than the cost, it makes sense to go ahead with it. For example, if making one more toy costs $5 but sells for $10, the extra $5 profit shows that this decision is good. This analysis helps individuals and businesses decide whether to increase or decrease their activities based on the balance of costs and benefits.
Detailed Explanation
All the statements provided misunderstand key ideas about marginal cost and benefit analysis. Other options are incorrect because This suggests that benefits must always be greater than costs; This implies that equal benefits and costs are not justifiable.
Key Concepts
Marginal Cost and Benefit Analysis
Resource Allocation
Economic Efficiency
Topic
Marginal Cost and Benefit Analysis
Difficulty
easy level question
Cognitive Level
understand
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