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This posting addresses marginal benefits and marginal costs.

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Marginal benefits and marginal costs

A. Capture the way total benefits and total costs change as the amount of an activity changes just a little bit
B. Are constant, regardless of the amount of an activity that is pursued
C. Tend to increase as a decision maker does more of an activity
D. Tend to increase as a decision maker does more of an activity

The marginal benefit of an action

A. Equals the additional benefit produced by extra units of X and tends to decrease as X increases
B. Equals the additional benefit produced by the total units of X and tends to increase as X increases
C. Equals the additional benefit produced by the total units of X and tends to decrease as X increases
D. Equals the additional benefit produced by extra units of X and tends to increase as X increases

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Solution Preview

1. The correct answer is A.

The main advantage of a marginal benefit and marginal cost analysis is that it shows the changes in the benefits and costs with varying degrees of activity. Management changes the ...

Solution Summary

The solution provides the correct answers to multiple choice questions regarding marginal benefits and marginal costs. References are also provided.

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Economics: mosquito control exercise

Suppose there are only two individuals in society. Person A's demand curve for mosquito control is given by:

[Note: let "_" denote a subscript]

q_n = 100 - p

for person B, the demand curve for mosquito control is given by:

q_b 200 - p

A. Suppose mosquito control is a pure public good; that is, once it is produced, everyone benefits from it. What would be the optimal level of this activity if it could be produced at a constant marginal cost of $120 per unit?

B. If mosquito control were left to the private market, how much might be produced? Does your answer depend on what each person assumes the other will do?

C. If the government were to produce the optimal amount of mosquito control, how much will this cost? How should the tax bill for this amount be allocated between the individuals if they are to share it in proportion to benefits received from mosquito control?

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