Question

If the marginal cost of purchasing a product is greater than the additional satisfaction of consuming it, what should the decision maker do?

Answer 1

The rational decision maker follows the equimarginal principle by choosing that level of consumption for which marginal benefit obtained from additional unit of consumption equals the marginal cost of providing that additional unit. When marginal cost exceeds marginal benefit for certain amount of consumption, marginal profit is negative at that level, therefore the decision maker will be able to lower such marginal loss to the level of zero by decreasing consumption.