Expert Answer. Economists would say the marginal cost of an additional rider is nearly zero. For example, suppose you make sneakers and you have a company division that makes gold-colored sneakers with specialty soles and that division has turned out not to be the big money-maker you hoped. (Economists sometimes summarize this by saying, “Sunk costs are sunk.”) And in what you do next, you should weigh the costs and benefits starting afresh for the next few minutes of your time–which is what economists mean when they say, “Think at the margin.” At the margin, you could get a parking spot for $10 or you could drive around and maybe get a parking spot for free with a probability of, say, 20% in the next hour. The marginal cost of producing computer chips is the entire cost of producing one more computer chip. The word “marginal” in common speech or layman’s use sometimes refers to an iffy project. The choice, Mankiw says, is not between fasting and eating like a pig, but whether to eat another spoonful of mashed potatoes. C. Efficiency. Menger worked separately from William Jevons and Leon Walras and reached similar conclusions by a different method. The marginal cost of finding a parking space could be only $10; or it could be another hour of driving around hoping for a free spot to open up just as you are in position to grab it. In this case, the average cost of each seat is $100,0001200, which is $500. In this case, the average cost of each seat is $100,000/200, which is $500. That’s where thinking on the margin comes in. It would be some small number–say, an additional 5 cents in interest you might gain, plus some psychological marginal benefit–say, something you value at 2 cents–in terms of additional feelings of security. Choosing to work an extra hour of overtime is an example of: A. thinking at the margin. VII.29], In that static condition in which competition would produce its full effects and bring wages to a natural standard, the pay of labor, as has just been shown, would equal the product that could be separately traced to it. VII.26], Here, then, is a marginal fraction of the supply of labor; and it would seem that it is in a position to set the market rate of pay for all labor. He is on the margin of bare subsistence. If an hour extra work weeding means you will get 12 more tomatoes, then one additional hour of work results in 12 additional tomatoes. William Jevons was one of three men to simultaneously advance the so-called marginal revolution. We need to make a distinction between thinking logically and thinking rationally. But those who advocate free-range and organic produce are trading off costs against other values–such as my chickens having a little elbow room and a chance to smell some roses. Which in turn may entail building a new factory and hiring all its workers, or even researching a whole new way to produce chips–perhaps an additional hundred thousand dollars, at an average cost of a dollar per additional chip or even an additional few million dollars. Someone had scribbled a note in the margin . ), that gift is worth much less to you (presuming you have a convex utility function for bananas). You ignore the sunk costs of what’s already going to happen, and weigh up the costs and benefits of adding in something extra (extra work, money, bananas etc.). Incentives. You have to consider all the additional costs for each option before making a decision. When some people hear that statement, they react, thinking that they are disagreeing, with comments like “I would still drive to work.” They probably would, but this reaction shows a failure to think on the margin. See the answer. Limit to the best man 's experience ; a margin of 8.3.... 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