Question

select the correct answer.
a 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 companys 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.

Explanation:

To determine the company's decision, we analyze marginal benefit (MB) and marginal cost (MC). The company prioritizes the project over the new office, meaning the MB of completing the project is greater than its MC, and also greater than the MB of building the office (since they delay the office for the project).

• Option A: If the MB of completing the project > its MC, and the project is prioritized over the office, this makes sense. The company sees more benefit in the project than the cost of doing it (and more than the benefit of the office).
• Option B: If MC of office = MB of project, there's no strong reason to prioritize one over the other, so this is incorrect.
• Option C: The question is about the current decision (holding off for the project), not long - run marginal benefits of the office, so this is irrelevant.
• Option D: If MB of office < its MC, the company would not be considering building the office at all, but the company was planning to build it (just held off), so this is incorrect.

Answer:

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