According to the marginal principle, a rational firm will introduce a movie sequel as long as:
A) total benefit equals total cost.
B) marginal benefit exceeds marginal cost.
C) marginal benefit is less than marginal cost.
D) marginal benefit equals marginal cost.

Question

Quizplus · Accepted Answer

The marginal principle suggests that rational firms will continue to produce a product or make an investment as long as the marginal benefit exceeds the marginal cost. In the case of introducing a movie sequel, the firm will only do so if the increase in revenue from the sequel (marginal benefit) is greater than the cost of producing the sequel (marginal cost). Therefore, option B is the correct answer as long as the marginal benefit of the sequel outweighs the marginal cost.

According to the Marginal Principle, a Rational Firm Will Introduce