What action should be taken if the increased cost exceeds the incremental (marginal) return?

When the increased cost of an investment exceeds the incremental or marginal return, it indicates that the additional spending is not generating enough additional revenue to justify its cost. In such cases, decreasing spending is a prudent action. This approach helps to optimize financial resources by ensuring that funds are allocated to initiatives that provide a positive return on investment.

Maintaining or increasing spending under these circumstances could lead to wasted resources, reduced profitability, and inefficient use of budget. Instead, it is wise to analyze where cuts can be made or to shift focus to strategies that yield better returns. By decreasing spending, an organization can mitigate losses and potentially redirect funds to more effective areas that contribute positively to overall business performance.