Which of the following is typically the first step in marginal analysis?

• A. Identifying and measuring the additional benefits and costs of a decision
• B. Comparing average costs to average benefits
• C. Determining the market equilibrium price
• D. Calculating total revenue and total cost

Answer: (A)

Verified step by step guidance

1. Understand that marginal analysis involves comparing the additional (marginal) benefits and costs that result from a decision or a change in behavior.
2. Recognize that the first step in marginal analysis is to identify and measure these additional benefits and costs, rather than looking at averages or totals.
3. Recall that average costs and average benefits provide overall per-unit measures, but marginal analysis focuses specifically on the incremental changes.
4. Note that determining market equilibrium price or calculating total revenue and total cost are important in other contexts but are not the initial step in marginal analysis.
5. Therefore, the initial step is to clearly identify and quantify the extra benefits and extra costs associated with a particular decision or action.