What type of decision making involves comparing the additional benefits and costs of activities?

Marginal decision making is a critical concept in economics that revolves around analyzing the additional benefits (marginal benefits) and additional costs (marginal costs) arising from a particular decision or action. This approach helps individuals and businesses determine whether the benefit of an action outweighs its cost when making choices.

In many scenarios, decision-makers face options where the consequences of each choice are not binary but rather involve incremental changes. By focusing on the marginal changes—essentially, the impact of one more unit of action—agents can make more informed and optimal decisions. For instance, a company contemplating the production of one additional unit of product would assess whether the revenue generated from that unit exceeds the cost of production. If the answer is yes, then it is beneficial to proceed with the production.

Other forms of decision making, although important in their own rights, do not specifically focus on the comparison of additional benefits and costs in the same way that marginal decision making does. This specificity makes marginal decision making a fundamental principle in economic reasoning and resource allocation.