Cost Benefit Analysis Civics and Economics 2013-2014

Remember! Marginal means one extra unit Marginal cost- the cost of production (for a business) or cost of purchase (for consumer) for one more unit Marginal benefit- The pleasure gained (money, satisfying hunger) for more unit bought, produced or sold (depending if you are a consumer or producer)

T-Shirts!! Marginal Benefit for 10 t-shirts With extra units produced, MB has now decreased Marginal benefit has now reached $50 When 40 t-shirts produced (MB=MC)

Explanation You want to produce the most amount of t-shirts that people are willing to buy There is a number where your supply will equal your demand. Supply is shown by cost, demand is shown by benefit Benefit will decrease with every extra unit produced On this chart, you are maximizing your potential at 40 t-shirts produced. The marginal benefit is plotted at 50, which matches your cost of production. We know we can sell all of our supply at 40 t-shirts, because if we produce any more, we will now have higher costs. These type of analysis are based on any type of data and are very detailed. We don’t know all the details behind this chart; the goal is to make sure MB=MC.