Question
Which words best complete the following sentence? A rational decision maker always chooses the option for which marginal benefit is __ marginal cost. a. more than b. less than c. unrelated to d. equal to
Answer
4.5
(239 Votes)
Drake
Professional · Tutor for 6 years
Answer
a. more than
Explanation
In the context of rational decision-making, the concept of marginal benefit (MB) and marginal cost (MC) is crucial. A rational decision maker is someone who makes decisions based on maximizing their utility or benefit. When making a choice, a rational decision maker will compare the additional benefit gained from an option (marginal benefit) to the additional cost incurred by taking that option (marginal cost). The rational choice is to proceed with an action if the marginal benefit exceeds the marginal cost because it implies that the action adds more value than it costs. If the marginal benefit is equal to the marginal cost, the decision maker is indifferent to taking or not taking the action, as it neither adds nor subtracts value. Choosing an option where the marginal benefit is less than the marginal cost would be irrational, as it would lead to a decrease in overall utility.