The marginal net benefit of an activity for a business firm is positive if the activity:

• A. Increases total income for the business more than it increases total cost for the business
• B. Increases total cost more than income
• C. Keeps total income constant
• D. Decreases total revenue

Answer: (A)

Positive marginal net benefit happens when the extra income from doing the activity exceeds the extra cost it requires. In practical terms, the firm should take the action if the additional revenue it gains is larger than the additional costs it incurs. That’s why the option describing total income increasing more than total cost fits best: it shows the activity adds more to revenue than it costs, yielding a positive net effect on profitability. If costs rise more than income, the net benefit is negative; if income doesn’t rise (or falls), the net benefit isn’t positive.