Question

Senator Smith argues that the U.S. should spend another $100 million on healthcare this year in addition to the $800 million that we are currently spending. Senator Jones argues that we should not. Which of the following related statements is correct?
A) The extra $100 million spent on health care will not provide as much benefit as the previous $100 million due to diminishing marginal benefit.
B) The extra $100 million spent on health care will necessarily provide no extra benefit due to the problem of diminishing marginal benefit.
C) The extra $100 million spent on health care will decrease the total benefit derived from health care but will increase the marginal benefit.
D) Senator Smith must be a better person than Senator Jones since there can be no rational reason to oppose more health care spending.

Answer 1

Answer:

A) The extra $100 million spent on health care will not provide as much benefit as the previous $100 million due to diminishing marginal benefit.

Explanation:

The understanding of this question is based on the explanation of Diminishing Marginal Benefit

Diminishing Marginal Benefit is a law that states the an increase in the consumption of a thing while all other factor remain constant will reduce the marginal benefit or utility derived from the increased or additional unit.

Utility represents the benefit or satisfaction derived from consumption.

Based on this law, since $800 million has been spent on healthcare, every additional amount spent will bring in some benefit but will be at a diminishing rate. This means it will not provide as much benefit as the previous $100 million.