Question

Managers seeking to make the economically efficient decision and maximize profits undertake investments where...

A. marginal benefits of the investment are less than marginal costs of the investment.

B. marginal costs of the investment are less than marginal benefits of the investment.

C. marginal benefits equal zero.

D. marginal costs equal zero.

Answer 1

The profit maximization condition is given by the point where Marginal benefits = Marginal cost if the firm wants to be in equilibrium as well.

However, the managers who are seeking to make the economically efficient decision and maximize the profit, they undertake investments where Marginal benefits from the investments are more than the marginal costs associated with the investment. To be able to optimize and maximize the profits, it is important that they select investments where marginal benefits at a broader level are surely higher than the marginal costs.

Thus, Option B is the correct answer.