Question

Marginal Cost Marginal Benefit and Marginal Cost (Dollars) 00:42:18 Marginal Benefit Quantity of Shoes Refer to the diagram for athletic shoes. The optimal output of shoes is Multiple Choice Is where marginal cost equals marginal benefit O is where marginal beneft exceeds marginal costs 0 0

Answer 1

Here, the optimal quantity of shoes is the marginal cost is equal to marginal benefit i.e. ‘Q₂’ because beyond this point cost of additional pair of shoes is higher than the benefit received from additional pair of shoes which means higher cost than benefit. Similarly, if before this point (left side from this point of intersection of two curves) benefit from additional pair of shoes is higher than the cost of additional pair of shoes, which means there is scope of gaining more profit. So, any point other than ‘Q₂’ is not optimal. Hence, the first option is the correct answer.