Given, MB = Marginal benefit and MC = Marginal cost. Then, for a positive decision variable in the optimal solution, which of the following relations holds? A) MB = MC = 0 B) MB - MC 0 C) MB - MC = 0 D) MB - MC

Question

Given, MB = Marginal benefit and MC = Marginal cost. Then, for a positive decision variable in the optimal solution, which of the following relations holds?
A) MB = MC = 0
B) MB - MC > 0
C) MB - MC = 0
D) MB - MC < 0
E) The relationship between MB and MC is indeterminate.

Quizplus · Accepted Answer

In the optimal solution for a positive decision variable, the marginal benefit (MB) equals the marginal cost (MC), which is represented by the condition MB - MC = 0. This equality signifies that the last unit of the decision variable added provides a benefit equal to its cost, indicating an efficient allocation of resources.

Given, MB = Marginal Benefit and MC = Marginal Cost