ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The marginal cost of studying an extra hour exceeds its marginal benefit.
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The marginal benefit of studying an extra hour exceeds its marginal cost.
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Studying harder will always improve your test scores.
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You will most likely get a lower than expected grade on your last exam.
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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: -According to the marginal analysis, an additional unit of a given activity (i.e. an extra hour of study in the given scenario) should be carried out only when the marginal benefit exceeds the marginal cost.
Detailed explanation-3: -What is happening to the opportunity cost as the number of hours of study of economics is increased? Why? The opportunity cost of each hour spent studying economics increases. The reason is that the returns to studying biology decreases as one studies more biology.
Detailed explanation-4: -The marginal benefit rule tells us that we can maximize the net benefit of any activity by choosing the quantity at which marginal benefit equals marginal cost. At this quantity, the net benefit of the activity is maximized.