Why do many economic decisions involve thinking at the margin?

• A. Because decisions at the margin are only relevant for large-scale economic choices.
• B. Because marginal analysis ignores opportunity costs.
• C. Because total costs and total benefits are always equal at the margin.
• D. Because marginal analysis helps individuals and firms compare the additional benefits and costs of a decision.

Answer: (D)

Verified step by step guidance

1. Understand the concept of 'thinking at the margin' which means evaluating the additional or incremental costs and benefits of a decision rather than looking at total costs or total benefits.
2. Recognize that economic decisions often involve choosing whether to do a little more or a little less of an activity, so marginal analysis helps in comparing these small changes.
3. Recall that marginal analysis involves calculating the marginal benefit (the additional benefit from one more unit) and the marginal cost (the additional cost from one more unit).
4. Realize that decisions are made by comparing marginal benefits and marginal costs to determine if the additional benefit outweighs the additional cost.
5. Conclude that thinking at the margin is crucial because it helps individuals and firms make efficient choices by focusing on the relevant incremental changes rather than total amounts.