When is a decision said to optimize resource use?

A decision is said to optimize resource use when marginal benefit equals marginal cost. This principle is fundamental in economics and is rooted in the idea of efficiency.

When making a choice, an individual or an organization assesses the additional benefits (marginal benefits) gained from an action against the additional costs (marginal costs) incurred. Optimal resource allocation occurs at the point where these two are equal. At this equilibrium point, the resources are being utilized in the most productive manner possible, as any increase in production beyond this point would yield a marginal cost that exceeds the marginal benefit, leading to inefficient outcomes.

For example, if a company is producing an additional unit of a product, the added benefit gained from selling that unit should exactly match the cost incurred to produce it. If the cost exceeds the benefit, it would not be rational to produce that unit, as it would not justify the resource expenditure.

In contrast, considering scarcity is important but does not directly equate to optimizing resource use because recognizing scarcity alone does not ensure that resources are allocated efficiently. Maximizing total costs is counterproductive, as this would imply expending resources unnecessarily, while balancing opportunity costs focuses on trade-offs rather than the optimization threshold of marginal benefits and costs. Thus, optimal resource