📚 Learning Guide
Marginal Analysis in Economics
hard

Arrange the following steps in the process of conducting marginal analysis in order: A) Identify the marginal costs of producing an additional unit, B) Compare the marginal benefits to the marginal costs, C) Make a decision based on the comparison, D) Determine the marginal benefits of producing an additional unit.

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Learning Path
Learning Path

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Choose the Best Answer

A

A → D → B → C

B

D → A → B → C

C

A → B → D → C

D

D → B → A → C

Understanding the Answer

Let's break down why this is correct

Answer

To conduct marginal analysis, you first need to identify the marginal costs of producing an additional unit, which is step A. Next, you determine the marginal benefits of producing that same unit, following step D. After you have both the marginal costs and benefits, you compare them in step B to see if the benefits are greater than the costs. Finally, based on this comparison, you make a decision in step C about whether to produce that additional unit or not. For example, if producing one more toy costs $5 (marginal cost) but brings in $10 in sales (marginal benefit), you would decide to produce it since the benefits outweigh the costs.

Detailed Explanation

First, you find out how much it costs to make one more item. Other options are incorrect because This option starts with benefits instead of costs; This option compares costs and benefits before finding out the benefits.

Key Concepts

Marginal Analysis
Marginal Costs and Benefits
Opportunity Cost
Topic

Marginal Analysis in Economics

Difficulty

hard level question

Cognitive Level

understand

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