What do economists mean by the word "marginal"?
A.extra or additional
B.unimportant
C.small
D.first
Economists believe that an activity should be continued up to
the point where
A.the marginal benefit from the activity is equal to the
marginal cost.
B.the marginal benefit from the activity is greater than the
marginal cost.
C.the marginal benefit from the activity is less than the
marginal cost.
D.the marginal benefit from the activity plus the marginal cost
equals zero.
Answer
1) Option A i.e., extra and addition is the correct
answer.
In economic, Marginal means the additional or change happening
in a factor.
For example, we have Marginal cost, Marginal revenue, Marginal
utility .
Marginal cost refers to the additional cost incurred when one
more unit is produced.
Marginal revenue is the additional revenue earned when one more
unit is sold.
Marginal utility shows the additional utility derived when one
more unit is consumed.
Therefore, Option A i.e., extra and addition is the correct
answer.
2) Option A I.e., the marginal benefit from the activity is
equal to the marginal cost is the correct answer.
Marginal benefit means the additional revenue or utility derived
from one more unit.
An economic activity should be continued till the stage where
MC= MB ( Marginal cost is equal to Marginal Benefit)
If Marginal cost is less than marginal benefit , then the
economic activity should not be stopped as it is benefiting the
producer.
If Marginal cost is more than the Marginal benefit, then the
economic activity should be stopped as it is giving negative
returns to the producer.
