Explain the marginal approach

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Marginal Analysis is one of the most important tools of modern Economic Thought, and it provides the foundation for the approach to solve many problems in Labour Economics.

Assume that you have to determine the optimal amount of workers (L) that need to be hired in a factory. The Marginal Benefit to the factory is approximately given by the expression:

MB = 100,000 - L.

The Marginal Cost to the firm is approximately given by the expression:

MC = 10,000 + L ^2.

a) Explain the Marginal Approach. How do you make a decision using this approach?

b) Why the model has the Marginal Benefit as decreasing?

c) Why the model has the Marginal Cost increasing at an increasing rate?

Reference no: EM132489484

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