ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Decision made at the “margin” of an activity to do a bit more or a bit less of an activity.
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Type of cost-benefit decision making that compares extra benefits to extra costs of an action.
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Either A or B
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None of the above
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Detailed explanation-1: -Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.
Detailed explanation-2: -Marginal benefit is the maximum amount a consumer will pay for one additional good or service. Marginal benefit generally decreases as consumption increases. Marginal cost of production is the change in cost for making one additional good or incremental unit of service.
Detailed explanation-3: -Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice. Certain inherently desirable products such as education and health care should be produced so long as resources are available.
Detailed explanation-4: -Marginal analysis helps businesses determine the effect of small changes in one factor on the resulting change in another factor. There are three types of marginal analysis: marginal cost analysis, marginal revenue analysis, and marginal income analysis.