A rational decision maker takes an action only if the:

• A. marginal benefit of the action exceeds the marginal cost
• B. total benefit of the action is less than the total cost
• C. average benefit of the action equals the average cost
• D. opportunity cost of the action is zero

Answer: (A)

Verified step by step guidance

1. Understand the concept of marginal analysis, which is fundamental in microeconomics for rational decision making. Marginal benefit refers to the additional benefit received from taking one more unit of an action, while marginal cost is the additional cost incurred from that action.
2. Recall that a rational decision maker compares the marginal benefit and marginal cost of an action rather than total or average values. This is because decisions are made incrementally, focusing on the next unit of action.
3. Identify that the decision rule is: take the action if and only if the marginal benefit (MB) is greater than the marginal cost (MC). This ensures that the action adds more value than it costs.
4. Recognize that if the marginal benefit is less than or equal to the marginal cost, the rational decision maker will not take the action, as it would not increase overall net benefit.
5. Conclude that among the given options, the correct condition for a rational decision maker to take an action is when the marginal benefit of the action exceeds the marginal cost.