Question

e. Marginal analysis is a decision-making tool.
i. Please define Marginal Cost and Marginal Benefit,
ii. Explain these 3 cases in terms of what you should do regarding an activity.
1. MB>MC 2. MC>MB 3. MC=MB
iii. Explain 3 examples of MC and 3 examples of MB related to the Keystone XL Pipeline question.

Answer 1

E.Marginal cost is the addition made to total cost when output rises by an additional unit. Marginal cost is defined as the ratio between change in total cost and change in output.

Marginal benefit is is the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. A person's marginal benefit is the maximum amount he is willing to pay to consume that additional unit of a good or service. In a normal situation, the marginal benefit decreases as consumption increases.
When MB>MC consumer should increase consumption because as consumption rises marginal benefit falls. Consumption should continue till MB=MC

When MB<MC consumer should lower his consumption such that MB rises. Consumption should fall until MB=MC

when MB=MC, consumer should change his behaviour since he is at equilibrium.

I don't what what the keystone question is