Question

Start-up company just acquired a big project. The project requires a lot of money. The company must hold off on building its new office to complete the project. What was the reason for the company's decision?
A.


The marginal benefit of completing the project outweighs the marginal cost of the project.


B.


The marginal cost of building a new office is equal to the marginal benefit of completing the project.


C.


There is no practical marginal benefit in building a new office for the company in the long run.


D.


The marginal benefit of the new office is less than its marginal cost.

Answer 1

Answer: The answer is A: The marginal benefit of completing the project outweighs the marginal cost of the project.

Explanation: The marginal cost will be the cost incurred by the company in trying to complete the big project they acquired. The marginal benefit in this case will be the maximum amount of money they can get from this project upon completion. Thus, for the company to take a decision to halt their ongoing new office building, they have clearly seen that what they stand to gain from the project is huge when compared to just stalling on a new office building. With this decision they can complete the project, continue the new office building later on, and still have a lot of profit after doing so.