When the increments are small such as a half sandwich

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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 ounces heavier 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 wanted to. 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? THINK 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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