Marginal thinking is best demonstrated by which of the following decisions?

• A. Continuing an activity as long as the marginal benefit of the next unit is at least as large as the marginal cost, i.e., $MB\ge MC$
• B. Ignoring sunk costs and choosing the option with the highest average benefit per unit
• C. Choosing the option with the lowest fixed cost regardless of output level
• D. Comparing total benefits to total costs for all units produced and choosing the option with the largest difference

Answer: (A)

Verified step by step guidance

1. Understand the concept of marginal thinking, which involves making decisions based on the additional benefit and additional cost of one more unit of an activity or good.
2. Identify the marginal benefit (MB) as the extra benefit gained from consuming or producing one additional unit.
3. Identify the marginal cost (MC) as the extra cost incurred from consuming or producing one additional unit.
4. Apply the decision rule: continue the activity as long as the marginal benefit of the next unit is greater than or equal to the marginal cost, expressed as \(\text{MB} \geq \text{MC}\).
5. Recognize that this approach focuses on incremental changes rather than total or average values, which distinguishes marginal thinking from other decision-making methods.