The optimization rule for unconstrained optimization is to select that level of activity at which
A)marginal benefit equals marginal cost.
B)total benefit is less than total cost.
C)total benefit is equal to total cost.
D)marginal benefit exceeds marginal cost.

Question

Quizplus · Accepted Answer

The goal of optimization in unconstrained optimization is to find the level of activity that maximizes the difference between the benefits and costs. This means that the optimal level is the one at which the marginal benefit (the additional benefit from one more unit of activity) equals the marginal cost (the additional cost from one more unit of activity). Therefore, choice A is the correct answer. Choices B and C are incorrect because they imply that benefits and costs are equal or that costs exceed benefits. Choice D is also incorrect because it suggests that the benefits exceed the costs but doesn't consider the trade-off between additional benefits and additional costs.

The Optimization Rule for Unconstrained Optimization Is to Select That