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Homework answers / question archive / Which of the following is a correct statement regarding the marginal principal? A) Continue an activity as long as the marginal benefit equals the marginal cost B) Continue an activity as long as the marginal benefit exceeds the marginal cost C) Continue an activity as long as the benefit exceeds the cost D) Continue an activity as long as the total benefit equals the total cost
Which of the following is a correct statement regarding the marginal principal?
A) Continue an activity as long as the marginal benefit equals the marginal cost
B) Continue an activity as long as the marginal benefit exceeds the marginal cost
C) Continue an activity as long as the benefit exceeds the cost
D) Continue an activity as long as the total benefit equals the total cost
The correct answer is: B) Continue an activity as long as the marginal benefit exceeds the marginal cost
According to the marginal principle, the net benefit will be maximized at the point where the marginal benefit is equal to the marginal cost. Therefore, an activity should continue as long as its marginal benefit is greater than its marginal cost, and we should reduce the activity if the marginal cost is greater than the marginal benefit until the optimal condition is attained where the marginal benefit is equal to the marginal cost.
