When Does a Rational Decision Maker Take an Action

question 2

Multiple Choice

When does a rational decision maker take an action?

• A) only if the marginal benefit is less than the marginal cost
• B) only if the marginal benefit is greater than the marginal cost
• C) only if the average benefit is greater than the average cost
• D) only if the marginal benefit is greater than both the average cost and the marginal cost

---

Definitions:

Value to Buyers

The maximum amount of money buyers are willing to pay for a good or service, reflecting the perceived utility or benefit derived from the purchase.

Cost to Sellers

The total expenses that a seller has to bear to produce and sell a product, including production, marketing, and distribution costs.

Increase in Demand

A situation where more consumers are willing to purchase a product at a given price, often due to changes in income, tastes, or the price of related goods.

Decrease in Demand

A decrease in demand refers to a fall in the quantity of a product that consumers are willing and able to purchase at various prices, typically leading to a downward shift in the demand curve.