Question

To maximize net benefits, a manager must ensure that for the last unit of any activity...

  1. To maximize net benefits, a manager must ensure that for the last unit of any activity or production...

    A.

    the marginal benefit is greater than the marginal cost, MB > MC.
    B.

    the marginal benefit is equal to the marginal cost, MB = MC.
    C.

    the marginal benefit is less than the marginal cost, MB < MC.
    D.

    there is no marginal benefit left to obtain, MB = 0.
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Answer #1

Answer- To maximize net benefits, a manager must ensure that for the last unit of any activity or production...

B. the marginal benefit is equal to the marginal cost, MB = MC.

Explanation- when MB > MC , the excess of marginal benefit from marginal cost represent a net benefit for society.

When MB < MC, then it costs a firm more to produce the last unit than the benefits we derive from the last unit. It means a firm could be better off if we reduced production.

When MB = MC , an extra unit of output will increase benefits more than it increase costs.

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