If the Marginal Benefit from Another Computer Exceeds the Marginal

question 364

Multiple Choice

If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently,

• A) more resources should be used to produce computers.
• B) if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers.
• C) fewer resources should be used to produce computers.
• D) None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently.

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Definitions:

Fixed Costs

are business expenses that remain the same regardless of the level of output or sales, such as rent, salaries, and loan payments.

Variable Costs

Costs that vary directly with the level of production output, including expenses like labor and material costs.

Operating Leverage

A financial ratio that measures the degree to which a company can increase operating income by increasing revenue, highlighting the impact of fixed costs.

High Debt

A situation where a company or individual carries a large amount of debt relative to their assets or equity.