If an activity is worth pursuing at all, then the only information the decision-maker needs to make a choice is: a

Economics Dec 15, 2020

If an activity is worth pursuing at all, then the only information the decision-maker needs to make a choice is:

a. Total benefits,

b. Marginal benefits and marginal costs,

c. Variable costs,

d. Fixed costs.

Expert Solution

The correct answer is b. Marginal benefits and marginal costs.

Since we know that the activity is worth pursuing, we know that there is an opportunity for profit.In order to maximize profit, we want to produce goods or services until the marginal benefit equals the marginal cost. Beyond that point, the marginal benefit will be lesser than the marginal cost and thus every additional unit will decrease the firm's overall profit.

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