Shlieffen Making Decisions Essay
3/17/05
5:55 PM
chapter
500_12489_CH07_170-191
7
Page 170
>> Making
Decisions
A T A L E O F T W O I N VA S I O N S
O
6, 1944, ALLIED SOLDIERS
much should be used to defend Germany’s
stormed the beaches of Norman-
border with France? The original plan,
dy, beginning the liberation of
devised by General Alfred von Schlieffen,
France from German rule. Long before the
allocated most of the German army to the
assault, however, Allied generals had to
invasion force; on his deathbed, Schlieffen is
make a crucial decision: where would the
supposed to have pleaded, “Keep the right
soldiers land?
wing [the invasion force] strong!” But his
N JUNE
How economists model decision …show more content…
A margin is an edge; what you do in marginal analysis is push out the edge a bit, and see whether that is a good move.
We will begin our study of marginal analysis by focusing on marginal cost, and we’ll do that by considering a hypothetical company called Felix’s Lawn-mowing
Service, operated by Felix himself with his tractor-mower.
Marginal Cost
Felix is a very hardworking individual; if he works continuously, he can mow 7 lawns in a day. It takes him an hour to mow each lawn. The opportunity cost of an hour of
Felix’s time is $10.00 because he could make that much in his next best job.
His one and only mower, however, presents a problem when Felix works this hard.
Running his mower for longer and longer periods on a given day takes an increasing toll on the engine and ultimately necessitates more—and more costly—maintenance and repairs.
The second column of Table 7-4 shows how the total daily cost of Felix’s business depends on the quantity of lawns he mows in a day. For simplicity, we assume that Felix’s only costs are the opportunity cost of his time and the cost of upkeep for his mower.
TABLE
7-4
Felix’s Marginal Cost of Mowing Lawns
Quantity of lawns mowed
Felix’s total cost
0
5:55 PM
chapter
500_12489_CH07_170-191
7
Page 170
>> Making
Decisions
A T A L E O F T W O I N VA S I O N S
O
6, 1944, ALLIED SOLDIERS
much should be used to defend Germany’s
stormed the beaches of Norman-
border with France? The original plan,
dy, beginning the liberation of
devised by General Alfred von Schlieffen,
France from German rule. Long before the
allocated most of the German army to the
assault, however, Allied generals had to
invasion force; on his deathbed, Schlieffen is
make a crucial decision: where would the
supposed to have pleaded, “Keep the right
soldiers land?
wing [the invasion force] strong!” But his
N JUNE
How economists model decision …show more content…
A margin is an edge; what you do in marginal analysis is push out the edge a bit, and see whether that is a good move.
We will begin our study of marginal analysis by focusing on marginal cost, and we’ll do that by considering a hypothetical company called Felix’s Lawn-mowing
Service, operated by Felix himself with his tractor-mower.
Marginal Cost
Felix is a very hardworking individual; if he works continuously, he can mow 7 lawns in a day. It takes him an hour to mow each lawn. The opportunity cost of an hour of
Felix’s time is $10.00 because he could make that much in his next best job.
His one and only mower, however, presents a problem when Felix works this hard.
Running his mower for longer and longer periods on a given day takes an increasing toll on the engine and ultimately necessitates more—and more costly—maintenance and repairs.
The second column of Table 7-4 shows how the total daily cost of Felix’s business depends on the quantity of lawns he mows in a day. For simplicity, we assume that Felix’s only costs are the opportunity cost of his time and the cost of upkeep for his mower.
TABLE
7-4
Felix’s Marginal Cost of Mowing Lawns
Quantity of lawns mowed
Felix’s total cost
0