When actions are finely divisible marginal benefit is ______ marginal cost at an interior best choice.
A) greater than
B) less than
C) equal to
D) greater than or equal to

Question

Quizplus · Accepted Answer

When actions are finely divisible, the marginal benefit equals the marginal cost at the interior best choice. This is because when actions are finely divisible, small changes in the action lead to small changes in both marginal benefit and marginal cost, making it possible to find the point where the two are equal. Thus, the best choice is at the point where marginal benefit equals marginal cost, which we can identify by calculating the derivatives of the benefit and cost functions and finding where they intersect.

When Actions Are Finely Divisible Marginal Benefit Is ______ Marginal