Question

Microeconomics

Posted 6 months ago

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Which of the following is true at the optimal quantity, whether it is a quantity produced or a quantity consumed?
Choose 1 answer:
A) Marginal benefit equals marginal cost
(B) Marginal benefit is minimized
(c) Marginal benefit is greater than the marginal cost
(D) Net benefit is minimized
(E) An additional unit of happiness is less than its additional cost
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Answer from Sia

Posted 6 months ago

Solution

a

Optimal Quantity: At the optimal quantity, the marginal benefit (MB) equals the marginal cost (MC). This is the point where the additional benefit of consuming or producing one more unit is exactly equal to the additional cost incurred. Mathematically, this can be expressed as:
$MB = MC$

b

Incorrect Options:
- Marginal benefit is minimized: This is incorrect because the optimal quantity is not about minimizing marginal benefit but equating it to marginal cost.
- Marginal benefit is greater than the marginal cost: This would imply that there is still room to increase the quantity to reach the optimal point.
- Net benefit is minimized: This is incorrect because the optimal quantity maximizes net benefit, not minimizes it.
- An additional unit of happiness is less than its additional cost: This would imply that the quantity is beyond the optimal point

Answer

A. Marginal benefit equals marginal cost

Key Concept

Optimal Quantity

Explanation

At the optimal quantity, the marginal benefit equals the marginal cost, ensuring that resources are allocated efficiently and net benefit is maximized.

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