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The concept of consumer choice theory, opportunity cost, cost-benefit analysis, and utility analysis. It also discusses the characteristics of indifference curves, budget constraints, and budget lines. examples to explain the concepts and their applications.
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UNLIMITED WANTS CONSUMERS
CONSTRAINTS MAXIMIZE SATISFACTION
A CEO decides to lay off workers to save money. The desire to make more money is driving the decision. What is the trade off?
MARGINAL COST & MARGINAL BENEFIT
MB = MC : Efficient and productive MB > MC : Continue Consuming MB < MC : Not Consume
Quantity Total Cost Marginal Cost 0
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Quantity Total Revenue Total Cost Profit/ Loss MB MC Net Marginal Benefit/ Cost DECISION 1 35 30 5 35 30 5 Continue 2 45 40 5 10 10 0 Efficient 3 57 49 8 12 9 3 Continue 4 67 67 0 10 18 -8 Not continue 5 72 77 -5 5 10 -5 Not continue