📚 Learning Guide
Marginal Analysis in Economics
easy

In marginal analysis, what is the primary goal when comparing additional costs to additional benefits?

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Learning Path

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Choose the Best Answer

A

To maximize total revenue

B

To minimize total cost

C

To determine the optimal level of production

D

To eliminate all costs

Understanding the Answer

Let's break down why this is correct

Answer

In marginal analysis, the primary goal is to determine whether the benefits of an additional action outweigh its costs. This means looking at the extra benefits you gain from doing something more, like producing one more unit of a product, and comparing them to the extra costs that come with it. For example, if a factory considers producing one more toy, it needs to see if the money made from selling that toy is greater than the cost of materials and labor needed to make it. If the benefits are higher, it makes sense to go ahead, but if the costs exceed the benefits, it is better to stop. Ultimately, marginal analysis helps individuals and businesses make smarter decisions by highlighting the importance of weighing the additional costs against the additional rewards.

Detailed Explanation

The main goal is to find the best level of production. Other options are incorrect because Some might think the goal is to make as much money as possible; People may believe that minimizing costs is the key.

Key Concepts

Cost-benefit analysis
Topic

Marginal Analysis in Economics

Difficulty

easy level question

Cognitive Level

understand

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