Question
A rational decision maker always chooses the option for which marginal benefit is: a. more than marginal cost. b. less than marginal cost. c. unrelated to marginal cost. d. equal to marginal cost.
Ask by Reid Cole. in the United States
Jan 24,2025
Real Tutor Solution
Tutor-Verified Answer
Answer
A rational decision maker chooses options where the marginal benefit is more than the marginal cost.
Solution
To determine the correct answer, let's analyze the options based on the principles of rational decision-making in economics.
1. **Marginal Benefit (MB)**: This is the additional benefit received from consuming one more unit of a good or service.
2. **Marginal Cost (MC)**: This is the additional cost incurred from consuming one more unit of a good or service.
A rational decision maker will continue to consume or choose an option as long as the marginal benefit exceeds the marginal cost. This is because:
- If \( MB > MC \): The decision maker gains more benefit than the cost incurred, making it a rational choice to proceed.
- If \( MB < MC \): The cost outweighs the benefit, and it would not be rational to choose this option.
- If \( MB = MC \): The decision maker is indifferent, as the benefit equals the cost, but they would not gain any additional net benefit from choosing this option.
Now, let's evaluate the options:
a. **more than marginal cost**: This is correct because a rational decision maker will choose options where the marginal benefit exceeds the marginal cost.
b. **less than marginal cost**: This is incorrect because it implies that the cost outweighs the benefit, which would not be a rational choice.
c. **unrelated to marginal cost**: This is incorrect because rational decision making is directly related to the comparison of marginal benefit and marginal cost.
d. **equal to marginal cost**: This is not a rational choice for maximizing benefit, as it indicates no net gain.
Based on this analysis, the correct answer is:
**a. more than marginal cost.**
Reviewed and approved by the UpStudy tutoring team
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Simplify this solution The Deep Dive
A rational decision maker always chooses the option where the marginal benefit exceeds the marginal cost. This is because, in making decisions, individuals aim to maximize their utility or satisfaction. If the additional benefit from an option surpasses the additional cost, it indicates a potentially profitable choice. In practice, this principle can be seen in various scenarios, like budgeting or investing time in activities. For example, if learning a new skill offers greater job opportunities than the hours spent studying, a rational decision maker would prioritize that learning over less beneficial tasks.
