The figure above shows the marginal benefit of additional minutes in a cell-phone plan.The marginal cost is constant at $0.10 per minute.
-It is optimal to buy more cell-phone time as long as
A) marginal benefit exceeds marginal cost.
B) marginal cost exceeds marginal benefit.
C) average benefit exceeds average cost.
D) average cost exceeds average benefit.
E) marginal benefit exceeds zero.

Question

The figure above shows the marginal benefit of additional minutes in a cell-phone plan.The marginal cost is constant at $0.10 per minute.
-It is optimal to buy more cell-phone time as long as
A) marginal benefit exceeds marginal cost. 
B) marginal cost exceeds marginal benefit. 
C) average benefit exceeds average cost. 
D) average cost exceeds average benefit. 
E) marginal benefit exceeds zero.

Quizplus · Accepted Answer

It is optimal to buy more cell-phone time as long as the marginal benefit exceeds the marginal cost. In this case, the marginal benefit is shown to be decreasing (as the additional minutes increase), but the marginal cost is constant at $0.10 per minute. As long as the marginal benefit is greater than $0.10 per minute, it is profitable to buy additional cell-phone time. Therefore, the answer is A.

The Figure Above Shows the Marginal Benefit of Additional Minutes