A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost. a. True b. False

a. True

Explanation:

It is true that a rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

There are four principles outline by Gregory Mankiw on how rational people make decision:

People face trade off: It means that people need to pay some price or give up something to get other things. Cost of something is what you give up to get it: While making decision opportunity cost are considered for any possible action taken. Rational people think at the margin: Marginal changes are the small changes to the existing plan of action. It is considered rational people take decision by comparing marginal benefit with cost. People respond to the incentive: Incentives are important to analyze while take decision on how market work as incentive induces people to act.