ECONOMICS
COST BENEFIT ANALYSIS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Marginal benefits exceed marginal costs.
|
|
|
Marginal costs exceed marginal benefits.
|
|
|
Marginal costs equal marginal benefits.
|
|
|
None of the above.
|
Detailed explanation-1: -If marginal benefit exceeds marginal cost, resources use will be more efficiently if the quantity is increased. If marginal cost exceeds marginal benefit, resource use will be more efficiently if the quantity is increased. Figure 6.1 shows the efficient quantity.
Detailed explanation-2: -A marginal benefit (or marginal product) is an incremental increase in a consumer’s benefit in using an additional unit of something. A marginal cost is an incremental increase in the expense a company incurs to produce one additional unit of something.
Detailed explanation-3: -1In economics, rational decisions occur when marginal benefits of an action equal or exceed the marginal costs.
Detailed explanation-4: -Marginal costs – The extra (additional) cost of producing one more unit of output; equal to the change in total cost divided by the change in output (and, in the short run, to the change in total variable cost divided by the change in output).