Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It helps in identifying the total cost of production.
B
It allows for the analysis of additional benefits versus additional costs.
C
It ensures that all resources are utilized equally.
D
It focuses solely on fixed costs in production.
Understanding the Answer
Let's break down why this is correct
Answer
Understanding marginal cost is important because it helps people and businesses make better decisions when trading off between different options. Marginal cost is the extra cost of producing one more unit of a good or service. When you know the marginal cost, you can compare it to the benefit you get from that extra unit. For example, if a bakery considers making one more cake, it should look at how much it costs to make that cake compared to how much money it will earn from selling it. By doing this, the bakery can decide whether to produce that extra cake or use its resources for something else that might bring in more profit, leading to more efficient use of resources overall.
Detailed Explanation
Knowing marginal cost helps you weigh extra benefits against extra costs. Other options are incorrect because This answer confuses total cost with marginal cost; This suggests that all resources should be used the same way, which isn't true.
Key Concepts
marginal cost
economic efficiency
trade-offs.
Topic
Understanding Marginal Analysis
Difficulty
hard level question
Cognitive Level
understand
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