If marginal benefit is greater than marginal cost, a rational choice involves ?
Correct answer: C. more of the activity
- A. no more of the activity.
- B. less of the activity
- C. more of the activity
- D. more or less, depending on the benefits of other activities
Explanation
When marginal benefit exceeds marginal cost, the additional unit provides more benefit than sacrifice, so a rational person should increase the activity. The activity should continue expanding until marginal benefit equals marginal cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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