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Stella is considering producing one more unit of steel at her manufacturing plant

Economics

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Stella is considering producing one more unit of steel at her manufacturing plant. She calculates that her costs will increase by $5,500 if she produces this unit, while her benefits from producing this additional unit will increase by $5,600. Stella should

a. produce the additional unit.

b. not produce the additional unit.

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The answer is a. produce the additional unit.

Sheila should produce the extra unit because the marginal benefit of $5,600 is greater than the marginal cost of $5,500. Therefore, she will earn a marginal income of $100 (i.e. the difference) if the unit is produced.