Suppose that the slope of a line tangent to the total cost curve at point X is equal to the slope of a line tangent to the total benefit curve at point X,then
A) Net benefit would be increased be reducing the amount of the activity
B) Net benefit would be decreased be reducing the amount of the activity
C) Net benefit would be increased be increasing the amount of the activity
D) Net benefit would be maximized

Question

Quizplus · Accepted Answer

If the slope of the total cost and total benefit curves are equal at point X, then the marginal cost and marginal benefit at that point are also equal. This implies that the activity should be continued up to the point where marginal benefit equals marginal cost, which is the condition for maximizing net benefit. Thus, option D is correct. Options A, B, and C are incorrect because they suggest that reducing or increasing the activity would change the net benefit, which is not necessarily true when the slope of the cost and benefit curves are equal.

Suppose That the Slope of a Line Tangent to the Total