An aside:
By this point, it should be clear that all optimal decisions involve setting marginal cost equal to the marginal benefit. Why?
Consider the following .......
If marginal benefit > marginal cost, then it's better to increase production (or consumption)
If marginal benefit < marginal cost, then it's better to decrease production (or consumption)
So, only when marginal benefit = marginal cost, there is no further tendency to make changes ..... and thus the situation is considered to be in equilibrium whether it's the input market, output market, etc. Not convinced that MB = MC is the best outcome? Reread the chapter on perfect competition and remember that this result applies to optimal decisions (production, consumption, number of hours to work, etc.) assuming no externalities. If negative externalities exist, and the MSC > MPC, then the optimal outcome is met when MB = MSC.
[Note: MPC = marginal private cost, MSC = marginal social cost, and MSC > MPC if there are negative externalities]
