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CH-1.3 PPT

# CH-1.3 PPT - and only if the marginal benefit of the action...

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Thinking at the Margin M icroeconomics P R I N C I P L E S   O F P R I N C I P L E S   O F N. Gregory Mankiw N. Gregory Mankiw

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Total Benefits Total Costs Firm Total Revenue Total Cost of Production US Environmental Protection Agency Total Benefit from Reducing Pollution Total Abatement Cost Benevolent Social Planner (C. 7) Value to Buyers Cost to Sellers
inciple 3: Rational People Think at the Margin (page

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arginal changes are small incremental chan o a plan of action. Marginal Changes
Individuals and firms can make better decisions by thinking at the margin. A rational decisionmaker takes an action if

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Unformatted text preview: and only if the marginal benefit of the action is at least as large as the marginal cost. \$ Quantity MB MC Q 1 Q 2 12 4 9 2 Q 3 Individuals and firms can make better decisions by thinking at the margin. A rational decisionmaker takes an action if and only if the marginal benefit of the action is at least as large as the marginal cost. A Calculus Version of “Thinking at the Margin” DO NOT PANIC!! A Calculus Version of “Thinking at the Margin” • π(Q) = TB(Q) – TC(Q) • dπ(Q*) / dQ = dTB(Q*) / dQ – dTC(Q*) / dQ • = MB(Q*) – MC(Q*) • = 0 • Therefore MB(Q*) = MC(Q*)...
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CH-1.3 PPT - and only if the marginal benefit of the action...

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