If the government estimates that the marginal cost of building a bridge is $100 million, while the marginal benefit is $150 million, the marginal principle dictates that the government should:
A) never build the bridge.
B) build the bridge.
C) wait until the marginal benefit of building the bridge drops to below $100 million before building the bridge.
D) wait until the marginal cost of building the bridge rises to above $150 million before building the bridge.

Question

Quizplus · Accepted Answer

According to the marginal principle, the government should undertake a project if the marginal benefit exceeds the marginal cost. In this case, the marginal benefit of building the bridge ($150 million) is greater than the marginal cost ($100 million), so the government should build the bridge. Therefore, option B is the best choice.

If the Government Estimates That the Marginal Cost of Building