When graphing a basic demand and supply model, we usually assume that as quantity increases,

Question

BlackTom AI · Accepted Answer

Marginal benefit decreases and marginal cost increases.

1. Relevant knowledge points and concepts
- Marginal benefit (MB) is the additional value or willingness to pay a consumer has for one more unit; in basic demand theory MB is represented by the demand curve and falls with quantity (law of diminishing marginal utility).
- Marginal cost (MC) is the additional cost to producers of producing one more unit; in the standard supply model MC rises with output (reflecting increasing opportunity costs or diminishing returns).
- The market equilibrium is found where MB = MC (demand meets supply).

2. Step-by-step reasoning
- Start on the demand side: as consumers consume additional units, each extra unit delivers less added satisfaction, so their willingness to pay for additional units falls. Graphically, this is a downward-sloping demand curve: higher quantity → lower marginal benefit/price.
- On the supply side: producing more requires using less-efficient resources or pushing existing inputs harder, so the extra cost of each successive unit tends to rise. Graphically, this is an upward-sloping supply curve: higher quantity → higher marginal cost/price.
- Therefore, as quantity increases along the horizontal axis, MB moves downwards and MC moves upwards, guaranteeing an intersection point that determines equilibrium quantity and price.

3. Intermediate logical steps (no numeric calc required)
- Quantity increases → consumers value extra units less → MB decreases.
- Quantity increases → producers face higher incremental costs → MC increases.
- MB decreasing and MC increasing implies a single crossing point (equilibrium).

4. Why the correct answer is correct
- The phrase “marginal benefit decreases and marginal cost increases” exactly describes the downward-sloping demand and upward-sloping supply assumptions of the basic model, grounded in diminishing marginal utility and rising marginal production costs.

5. Why other options would be incorrect
- “Both increase” contradicts the law of diminishing marginal utility (demand would slope up, implausible in the basic model).
- “Both decrease” would imply a downward-sloping supply (producers get cheaper as output rises), which contradicts the basic assumption of increasing marginal costs.
- Any mixed alternative that reverses either MB or MC would break the standard supply-demand intersection logic.

6. Conclusion
The correct statement is that marginal benefit decreases and marginal cost increases, which matches the provided answer.

When graphing a basic demand and supply model, we usually assume that as quantity increases,Single choice

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