Production Theory
This chapter heavily concentrates on two key ideas.
First, the idea that firms (and individuals) should make decisions
on how they optimize "on the margin" (where MC=MR). Often
people get confused and think about making decisions based on the
average (such as average total cost). Average total cost
includes FIXED costs, which are sunk and shouldn't influence future
decisions.
Second, the idea of diminishing marginal returns. That's the idea
that each additional unit provides less benefit than the previous
unit consumed.
Use these concepts to explain one action you did ONLY to where
MR=MC and not to your true "100% best ability".
For example:
You didn't study Economics for 100 hours this week because the
Marginal Benefit of the 100th hour was less than the incremental
knowledge you might have gained using the 100th hour
elsewhere, such as studying Chemistry. As a result, you used
some of your time doing something other than economics.
Edit: I'm not asking for an example of a pure trade
off. I don't want a I didn't work so I could spend time with
my family. While that's true, and related, that's not
what I'm asking. I am trying to make sure you recognize the
concept of MARGINAL. Why didn't you do some activity to
the literal best of your ability? For example, I
spent hundreds of hours preparing this class, but I didn't spend 24
hours a day. No matter how many hours I spent, I could have
done one more. So why didn't I? At
some point, the added hour would have produced such a small
difference in the outcome that it wouldn't have been worth the
relative cost. Name one thing you didn't do to your literal
absolute best.
From the above given data we concluded that there are two reasons. 1 because it is quite difficult to find mc and MR so I can't find optimal quantity. So I do not optimise. The other reason is it makes minor difference to output by working one more hour. These are reasons why I do not do activity till mr=Mc
One activity that I do is to answer questions. I often equate mc with MR in this matters. The reason is working more produce little addition in output but till then I feel so exhausted that I can't continue.
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