Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Average total cost
B
Profit maximization
C
Equilibrium price
D
Market surplus
Understanding the Answer
Let's break down why this is correct
Answer
In market dynamics, the relationship between supply and demand curves helps us understand how prices and quantities are determined in a market. The supply curve shows how much of a product producers are willing to sell at different prices, while the demand curve shows how much consumers want to buy at those prices. Similarly, marginal cost, which is the cost of producing one more unit of a good, relates to marginal benefit, which is the additional satisfaction or utility gained from consuming one more unit. For example, if a farmer considers growing an extra acre of corn, they will compare the marginal cost of planting and harvesting that acre with the marginal benefit of selling the corn. This comparison helps the farmer decide whether it is worth it to increase production, just as the supply and demand curves help determine market prices.
Detailed Explanation
Just like supply and demand work together, marginal cost helps businesses decide how to make the most money. Other options are incorrect because Average total cost is about all costs, not just the extra cost of one more item; Equilibrium price is where supply meets demand, but it doesn't directly relate to the cost of making one more item.
Key Concepts
Market Dynamics
Cost Structures in Economics
Equilibrium Analysis
Topic
Market Dynamics in Agriculture
Difficulty
medium level question
Cognitive Level
understand
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