At the 50th unit of action the marginal benefit is equal to

At the 50th unit of action, the marginal benefit is equal to $20 and the marginal cost is equal to $25. Which of the following is true? OA. The 50th unit of action should not be undertaken O B. The 50th unit of action minimizes total costs. O C. The 50th unit of action maximizes total gains (total profits). O D. The 50th unit of action should be undertaken.

Solution

Marginal benefit is basically the marginal revenue. The profit maximization occurs at where marginal cost is equal to marginal benefit. If marginal revenue is greater than marginal cost at any quantity, it is profitable to produce, but if marginal cost is high enough to cover the marginal benefit, it is a loss. Since here marginal cost is $25 and more than the marginal benefit of $20 at the 50th unit of action, hence the answer is

A. The 50th unit of action should not be undertaken.