The marginal benefit from consuming another unit of a good: B
A. must equal the marginal cost or the unit will not be consumed.
B. must be less than the marginal cost or the unit will not be consumed.
C. equals the increase in total benefits from consuming the unit.
D. equals the total benefit obtained from the consumption of all prior units.
- The marginal cost of consuming another unit of a good: 0
A. must equal the marginal benefit or the unit will not be consumed.
B. must exceed the marginal benefit or the unit will not be consumed.
C. equals the increase in total cost when another unit is consumed.
D. equals the total cost of consuming all prior units.
The Correct Answer and Explanation is :
Correct Answers:
- C. The marginal benefit from consuming another unit of a good equals the increase in total benefits from consuming the unit.
- C. The marginal cost of consuming another unit of a good equals the increase in total cost when another unit is consumed.
Explanation:
Understanding Marginal Benefit
Marginal benefit refers to the additional satisfaction or utility a consumer gains from consuming one more unit of a good or service. It is a key concept in economics, particularly in decision-making and consumer choice.
- When a consumer decides to purchase a product, they compare the marginal benefit (MB) with the marginal cost (MC).
- If MB > MC, the consumer continues to purchase the good because they derive more satisfaction from it than the cost they incur.
- If MB = MC, the consumer reaches an optimal consumption level, meaning they are maximizing their utility.
- If MB < MC, the consumer stops purchasing because the cost outweighs the benefit.
Given this understanding, the correct answer is C because the marginal benefit represents the increase in total benefit from consuming an additional unit, not the benefit obtained from all prior units.
Understanding Marginal Cost
Marginal cost refers to the additional cost incurred by producing or consuming one more unit of a good or service.
- It is calculated as the change in total cost when one extra unit is consumed or produced.
- A rational consumer will consume a good up to the point where MB = MC to ensure efficient resource allocation.
- The correct answer is C because the marginal cost measures the increase in total cost rather than the total cost of all prior units.
Understanding these concepts helps in making rational consumption and production decisions, ensuring efficient use of resources.