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Unformatted text preview: the decision in front of
Larry is whether to have half of a
tuna sandwich or a whole tuna
sandwich. Larry knows that he will
eat at least half a tuna sandwich, so
the real decision is whether to eat
the extra half sandwich. When the
increments are small (such as a half
sandwich), eating it isn’t likely to
add much weight. So, for Larry, the 174 Chapter 7 Business Operations Page 174 marginal cost (in extra
weight) of eating the
additional half sandwich is likely to be
small. Maybe he
will be two
than he would
have been had
he not eaten the
additional half sandwich.
What happens now is
that because all of Larry’s decisions about eating are really small
incremental decisions (a little larger
slice of pie, one more potato chip,
one more cookie), it is likely that
the marginal cost of each extra unit
of food is going to be small. And so
Larry will think to himself, What is a
slightly larger slice of pie going to
do? Very little.
Of course, a slightly larger slice
of pie will do very little if things stop
there. In fact, Larry has a series of
incremental decisions to make—one
more sip of soda, one more bit of
mashed potatoes, one more cookie,
and so on. It is only when we add
together all the individually tiny
incremental decisions that Larry
makes do we learn that he has
probably eaten more than he
Larry’s type of thinking is similar
to what happens when people litter.
They ask themselves, What will one
tiny piece of paper really matter?
What will a toothpick thrown on the
ground matter? Well, if only one tiny
piece of paper, or one tiny toothpick, was thrown on the ground, it wouldn’t matter much. If, however,
the same thing happens time after
time, the litter is going to build up
and then we’ll have a lot of trash
thrown on the ground.
In summary, a series of tiny
incremental decisions decided in a
certain way, whether they have to
do with eating or littering, can end
up producing an aggregate outcome
no one really intends. That’s why
Larry sometimes asks why it is just
so hard for him to lose weight
when, he says to himself, he wants
to lose weight so badly.
1. What are some dieting rules that Larry
could make for himself that would
greatly increase the costs of breaking the rules?
2. Do you ever litter? If so, what
have been the costs to you in the
situations where you have littered?
Could those costs have been
increased? If so, how?
ABOUT IT 07 (154-185) EMC Chap 07 5/8/06 4:55 PM Page 175 E X A M P L E : Harry produced 10 chairs
and the total cost is $1,000. Harry goes on to
produce one more chair (the 11th chair) and
his total cost rises to $1,088. The marginal
cost of chairs is $88—the additional cost of
producing the additional (which in this case
was the 11th ) chair.
E X A M P L E : Flight 23 is almost ready to
depart for Miami. Currently 98 out of the 100
seats are occupied. Jones walks up to the ticket
agent and asks to get on the plane. The ticket
agent says that the ticket price is $400. Jones
says,“That is an outrageous price to pay to get
on a plane that is headed to Miami whether I
get on it or not. In fact, th...
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- Winter '14