Question
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D. first Economists believe that an activity should be continued up to the point where A. the marginal benefit from the activity is less than the marginal cost. B. the marginal benefit from the activity is equal to the marginal cost. C. the marginal benefit from the activity plus the marginal cost equals zero. D. the marginal benefit from the activity is greater than the marginal cost.

Ask by Hall Gordon. in the United States
Feb 03,2025

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Answer

Economists say to continue an activity when the extra benefit equals the extra cost.

Solution

To determine the correct answer, let's analyze the options based on economic principles regarding marginal benefit and marginal cost. 1. **Marginal Benefit (MB)**: This is the additional benefit received from consuming or producing one more unit of a good or service. 2. **Marginal Cost (MC)**: This is the additional cost incurred from consuming or producing one more unit of a good or service. Economists generally advocate for continuing an activity until the marginal benefit equals the marginal cost. This is because: - If the marginal benefit is greater than the marginal cost (Option D), it implies that the activity is still providing a net benefit, and thus it should continue. - If the marginal benefit is less than the marginal cost (Option A), it indicates that the costs outweigh the benefits, and the activity should stop. - Option C suggests that the sum of marginal benefit and marginal cost equals zero, which is not a standard economic principle for decision-making. - Therefore, the point at which the activity should be continued is when the marginal benefit equals the marginal cost (Option B). Thus, the correct answer is: **B. the marginal benefit from the activity is equal to the marginal cost.**

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Economists emphasize the optimal decision-making point, known as "equilibrium," where resources are allocated most efficiently. This is the juncture where the additional benefit gained from one more unit of an activity matches exactly with what it costs to produce that unit. If you're generating more value than the resources you're consuming, you're likely doing something right! In real-world application, think of it like throwing a party. You want to keep inviting friends as long as they add fun (marginal benefit) that surpasses the costs (snacks, drinks, space). If inviting that last friend means you run out of chips without any increase in enjoyment, it’s time to call it a day!

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