marginal cost is greater than marginal benefit at the current activity level,the decision maker can increase net benefit by decreasing the activity because
A)total benefit will rise by more than total cost will rise.
B)marginal cost is rising faster than marginal benefit is falling.
C)net benefit is upward sloping at this point.
D)total cost will fall by more than total benefit will fall.

Question

Quizplus · Accepted Answer

When marginal cost is greater than marginal benefit, reducing the activity will decrease total costs more than it decreases total benefits, thus increasing net benefits. This is because at the margin, the cost of producing one more unit (marginal cost) exceeds the benefit derived from that unit (marginal benefit), so producing less will save more in costs than it loses in benefits.

Marginal Cost Is Greater Than Marginal Benefit at the Current