Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 1 - Limits, Alternatives, and Choices - Discussion Questions: 9

Answer

The marginal benefit curve slopes downwards whereas the marginal cost curve slopes upwards. The resources required for the production of a particular good can be allocated optimally at the point where the marginal cost is equivalent to the marginal benefits. In a case whereby the marginal cost is greater than the marginal benefit few resources ought to be allocated to that product. However, in a case whereby the marginal cost is less than the marginal benefit more resources ought to be assigned to the product.

Work Step by Step

The marginal benefit curve slopes downwards because the extra pleasure derived from good declines with each additional unit The marginal cost curve slopes upwards because extra cost increases with the production of extra units of a product.
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