Author Question: If the marginal total cost when moving from Option A to Option B is negative and the marginal total ... (Read 130 times)

amal · **on:** Jun 29, 2018

If the marginal total cost when moving from Option A to Option B is negative and the marginal total cost when moving from Option B to A is positive, which of the two options is better? What is the underlying principal behind the decision?

What will be an ideal response?

Question 2

In 2010 the family mean income of householders aged 15-24 years was approximately

A) 11,000.
B) 21,000.
C) 31,000.
D) 41,000.
E) 51,000.

kbennett34 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A negative marginal total cost implies that the decision maker is gaining from the switch between options. A positive marginal cost implies that the decision maker is losing from the switch between options. In this case, moving to Option B makes the decision maker better off, while moving away from it makes the decision maker worse off. Hence, Option B is better of the two. The underlying principal behind this decision is referred to as the Principal of Optimization at the Margin.

Answer to Question 2

D