The optimal number of units to produce is best expressed when
A)marginal benefit exceeds marginal cost.
B)marginal cost exceeds marginal benefit.
C)marginal benefit and marginal cost are close to equal.
D)marginal benefit and marginal cost are equal to zero.

Question

Quizplus · Accepted Answer

When marginal benefit and marginal cost are close to equal, it indicates that producing one more unit will result in nearly the same benefit as the cost, resulting in maximum profitability for the business. If marginal benefit exceeds marginal cost, the business may not be maximizing its profits by not producing more units, while if marginal cost exceeds marginal benefit, the business may be wasting resources by producing too many units. Marginal benefit and cost being equal to zero does not make sense in the context of production.

The Optimal Number of Units to Produce Is Best Expressed