Which of the following statements is FALSE?
A) Net benefit is measured by subtracting total cost from total benefit.
B) As long as marginal benefit exceeds marginal cost, net benefit will rise.
C) Net benefit is maximized where total benefit exceeds total cost by the greatest amount.
D) Net benefit is maximized where marginal benefit exceeds marginal cost by the greatest amount.

Question

Quizplus · Accepted Answer

Net benefit is maximized at the point where marginal benefit equals marginal cost, not where marginal benefit exceeds marginal cost by the greatest amount. This is because the optimal point of resource allocation is reached when the additional benefit of the last unit consumed or produced is equal to its additional cost.

Which of the Following Statements Is FALSE