You are watching: What does it mean to think at the margin
An instance of together rational behaviour would certainly be deciding to drink one an ext beer or security one more hour studying just if the added benefits were better than the extr costs. The optimum is wherein marginal benefit equals marginal cost.
And this applies to firms too. A certain maximises its revenues by producing the output at i beg your pardon marginal revenue is equal to marginal cost.
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Christensen likewise suggests that similar arguments can apply to certain decision making. The above article provides an instance he offers of decision made by executives in ~ the Blockbuster video clip chain. As soon as smaller rivals started providing movies through mail, Blockbuster instead ongoing to invest in the existing video clip store service model. This ultimately proved terrible for the company. The explanation provided for this is that building on previous invest made more sense than setup up a mail-order arm which would certainly cannibalise their existing business. On the various other hand, an different explanation may be the executives in ~ Blockbuster to be irrationally allowing sunk costs to affect their decision making.
Can you think that a situation where you have made decision to stick to your principles rather 보다 think in ~ the margin?Why does a for sure maximise benefit by developing the output at i m sorry marginal revenue is same to marginal cost?What perform you think space the main expenses of setup up a mail-order business?Are these expenses mainly fixed or variable costs?Why is it irrational to take it sunk prices into account once making a decision?Can friend think the a case where you have actually been affected by sunk costs?