Asked by Laura Cinnamon on Jul 11, 2024
Verified
According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____.
A) more than;an activity should be reduced
B) less than;an activity should be reduced
C) equal to;an activity should be reduced
D) more than;net benefit is maximized
Profit-Maximizing Principle
The concept that firms operate to achieve the highest profit possible, which involves setting output where marginal costs equal marginal revenues.
Marginal Analysis
An examination of the benefits and costs of one additional unit of production or consumption.
Marginal Benefit
Refers to the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.
- Identify the principles of the profit-maximizing principle of marginal analysis.
Verified Answer
BR
Bhuvi RelanJul 17, 2024
Final Answer :
B
Explanation :
DWhen the marginal benefit is less than the marginal cost (B), it indicates that the cost of producing one more unit of a good or service exceeds the benefit derived from it, suggesting that the activity should be reduced to maximize profit. Conversely, when the marginal benefit is more than the marginal cost (D), it implies that additional units of production or activity are still adding more to revenue than to costs, thus maximizing net benefit.
Learning Objectives
- Identify the principles of the profit-maximizing principle of marginal analysis.