Which of the following creates an incentive to increase the amount of an activity?
A)an increase in the marginal cost of the activity and a decrease in the marginal benefit from the activity
B)a decrease in the marginal cost of the activity and an increase in the marginal benefit from the activity
C)constant marginal cost and constant marginal benefit from the activity
D)an increase in the marginal cost of the activity and an equal increase in the marginal benefit from the activity
E)a decrease in the marginal cost of the activity and an equal decrease in the marginal benefit from the activity

Question

Quizplus · Accepted Answer

A decrease in the marginal cost of an activity and an increase in the marginal benefit from the activity will create an incentive to increase the amount of the activity. Lower marginal costs make it easier and cheaper to produce more of the activity, while higher marginal benefits make the activity more valuable or rewarding to engage in. This creates a situation where the benefits of the activity outweigh the costs, leading individuals to engage in the activity more frequently or in greater quantities.

Which of the Following Creates an Incentive to Increase the Amount