18. Marginal Benefit Equals Marginal Cost

[JulieTruliee]

Great video. Thank you so much!

[mishtram]

I know that MB=MC is where we want to be. But how is it better than where MB>MC? Is it possible to just stay there, and make a bigger profit at a lower cost (as compared to MB=MC)?

[intromediateecon]

@mishtram See my other comment on this video in response to Brianisonfire. He asked the same question.

[Killuminatismd]

good job

[itsHwang]

THANKKKKKKKKKKKK YOUUUUUUUUUUUUUUUUUUUUUU

[navigatro]

Wow, great job!! Great video!!

[vrdesk]

But LeBron travelled.

[maydie777]

@vrdesk lmaao

[bamboneski]

@vrdesk its a crabwalk..lol

[hammaerst]

I am a bit confused by your graph. If the player example, does it really hold that marginal benefit is declining. it makes sense that MC is increasing but MB shoud stay constant as he has always the same chance to hit??

great videos btw, you shoud become professor or something

[intromediateecon]

@hammaerst Good question. I don't think MB is constant in the basketball player example. Taking more shots means that the player will be taking worse shots (with lower probability of making) and/or getting tired from shooting so much. While we are at it, the increasing MC is more about the foregone shots of other players getting better (so the team would have to give up more for each additional shot taken by the star).

[hammaerst]

@intromediateecon

ok, makes sense. thx a lot for the quick response! 

[Brianisonfire]

so why should a firm produce where MB = MC  instead of MB being higher then MC?

[intromediateecon]

@Brianisonfire MB is the benefit of the next unit. MC is the cost of the next unit. If MB>MC, it is still worth producing at least one more unit. After all, you get to keep all of the profits from previous units and you gain MB - MC (which is positive). As long as MB>MC, you want to produce more.

As soon as you reach a unit where MB=MC, you want to stop. That's why you produce where MB = MC. It is worth producing the units before then (MB>MC) and it is not worth producing more.

[AXXXZS]

@intromediateecon Yes, but why would we want MB=MC on the last unit? If MB=MC on the last unit, then we're not making a profit anymore, but only covering our costs. Am I understanding this correctly?

[UtubeJKZ]

@Brianisonfire

I believe that question is the most asked about regarding MB/MC

if a firm were to sell at market equilbrium, that firm doesnt initially start at equilibrium

rather it keeps moving in increments until it reaches equilibrium

all that selling the firm did before they reached equilibrium is still revenue to them

[Brianisonfire]

@UtubeJKZ Thanks! I figured it out and rocked that on my midterm. I didn't to so hot on the Marginal Utility question though. Managerial economics is killing me.

[raynehenderson89]

i'm not even in your class or know what school you teach for....but your videos help me pass my tests with B's!! thank you!