In marginal analysis, a decision maker should undertake an activity when which condition holds at the margin?

• A. The average benefit is at least as large as the average cost (i.e., $AB\ge AC$).
• B. The total benefit is at least as large as the total cost (i.e., $TB\ge TC$).
• C. The marginal cost exceeds the marginal benefit (i.e., $MC>MB$).
• D. The marginal benefit is at least as large as the marginal cost (i.e., $MB\ge MC$).

Answer: (D)

Verified step by step guidance

1. Understand that marginal analysis focuses on the additional or incremental benefits and costs of a decision, rather than total or average values.
2. Identify the key terms: Marginal Benefit (MB) is the additional benefit from one more unit of an activity, and Marginal Cost (MC) is the additional cost from one more unit of that activity.
3. Recognize that the decision rule in marginal analysis is to undertake the activity if the marginal benefit is at least as large as the marginal cost, which can be expressed as \(M\!B \geq M\!C\).
4. Note why average or total comparisons are not the focus here: average benefit or total benefit comparisons do not capture the incremental changes that guide optimal decision-making at the margin.
5. Conclude that the correct condition for undertaking an activity in marginal analysis is when the marginal benefit equals or exceeds the marginal cost, ensuring that each additional unit adds net value.