Maximization of the net benefit of an activity occurs when: A) MB = MC. B) MB MC. C) MB

Question

Maximization of the net benefit of an activity occurs when:
A) MB = MC.
B) MB > MC.
C) MB < MC.
D) MB approaches MC.

Quizplus · Accepted Answer

Maximization of net benefit occurs when Marginal Benefit (MB) is equal to Marginal Cost (MC). This is because at this point, the added benefit gained from the activity is equal to the added cost incurred to undertake the activity. This ensures that resources are being allocated efficiently and there is no waste. If MB is greater than MC (option B), then it means that more benefit can be gained by undertaking the activity, and if MB is less than MC (option C), it means that the cost incurred is greater than the benefit gained, leading to a loss. Therefore, option A is the best choice. Option D is not accurate as MB approaching MC does not necessarily lead to maximization of net benefit.

Maximization of the Net Benefit of an Activity Occurs When