The No Marginal Improvement Principle tells us that,at the best choice:
A) the marginal benefit of the last unit must be at least as large as the marginal cost and the marginal benefit of the next unit must be no greater than the marginal cost.
B) marginal cost and marginal benefit of the last unit must always be equal.
C) the marginal benefit of the last unit must be at least as large as the marginal cost and the marginal benefit of the next unit must be greater than the marginal cost.
D) small changes in the level of an activity will always increase net benefit.

Question

Quizplus · Accepted Answer

The No Marginal Improvement Principle states that the optimal choice is reached when the marginal benefit of the last unit is equal to or greater than the marginal cost, and the marginal benefit of the next unit is no greater than the marginal cost. This means that the benefits gained from a decision will not increase if the cost of obtaining them also increases. Therefore, the best choice is where the marginal benefit equals or exceeds the marginal cost, ensuring no further improvement is possible. Thus, option A is correct. Options B, C, and D are incorrect because they do not take into account the trade-off between marginal benefits and marginal costs, which is essential to identify the optimal choice.

The No Marginal Improvement Principle Tells Us That,at the Best