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 at the best choice, 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. This means that the additional benefit gained from the next unit of an activity should not be greater than the cost of producing that unit. Choosing an activity where the marginal cost of producing an additional unit is greater than or equal to its marginal benefit ensures that net benefit is maximized. Therefore, the best choice is option A.

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