Question

How do you determine the marginal benefit and marginal cost of the decision?

Answer 1

Answer: Marginal benefit is what people are willing to give up in order to obtain one more unit of good . It means that extra gain generated from additional unit. It is determined in such a manner that extra gain generated from selling extra unit. Example : A customer is willing to paid $2 for purchasing another unit . It means that marginal benefit from an extra purchase of ice cream is $2

Marginal cost is increased in cost by producing one more unit of good.Marginal cost is U-shaped as it is determined by the variable cost of producing an extra unit of a product.Example : Marginal cost is the difference between total cost at 5 units - total cost at 4units.