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Chapter 1: Problem 7

Describe a recent situation in which you weighed marginal costs versus marginal benefits to make a decision.

Short Answer

Expert verified
In the situation described, if the perceived benefit of a higher grade is deemed more valuable than the cost of lost relaxation time, studying an extra hour would be the chosen option. The final decision depends on personal preferences and priorities.

Step by step solution

01

Identify the Situation

Identify a recent situation where you had to make a decision involving some cost and possible benefits. Take an example of deciding to study an extra hour for a test instead of watching a movie.
02

Define Marginal Costs

Determine the marginal cost to the above situation. Here, the marginal cost is the lost opportunity to relax and enjoy a movie. This can be any personal cost like money, time, or even enjoyment.
03

Define Marginal Benefits

Outline what marginal benefits can be derived from studying an extra hour for the test. This might mean a higher score on the test, which could increase the overall grade.
04

Weigh Costs and Benefits

Consider whether the marginal benefit of potentially increasing the grade is greater than the marginal cost of missed relaxation time.
05

Make a decision based on Marginal Cost vs Benefit Analysis

Decide whether to study an extra hour or watch the movie based on the analysis in step 4.

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Most popular questions from this chapter

If there were zero opportunity cost to everything you did, would you ever face a trade-off? Explain your answer.

Entrepreneurship is sometimes the "forgotten resource." Why do you think it is easier to forget entrepreneurship than, say, labor or capital?

Is the opportunity cost of attending high school the same for all high school students? Explain why or why not.

Give an example to illustrate how a person may incur an opportunity cost without paying anyone any money.

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