Overview
Marginal cost and benefit analysis is a crucial tool in economics that helps individuals and businesses make informed decisions. By evaluating the additional costs and benefits associated with a decision, one can determine the most efficient course of action. Understanding these concepts allows for ...
Key Terms
Example: If producing 10 units costs $100 and producing 11 units costs $105, the marginal cost is $5.
Example: If the benefit of consuming 1 more slice of pizza is $3, that is the marginal benefit.
Example: Choosing to spend time studying instead of going out has an opportunity cost of lost social time.
Example: Rent for a factory is a fixed cost.
Example: Materials used in production are variable costs.
Example: If fixed costs are $100 and variable costs are $50, total cost is $150.