Answer:
Firms use marginal analysis to determine production output levels by studying the effect on revenue of small changes to the number of items produced
Explanation:
Basically, marginal analysis allows a company to compare costs incurred with the benefits obtained by financial strategies. The logic of this analysis is to compare the costs of applying various measures to their respective results to increase profitability. Therefore, marginal analysis is considered a very important tool within the decision making process in a business environment.
In economics, the term “marginal analysis” is more frequent. However, in the area of Financial Management, the most used expression is “cost-benefit analysis”. That is, the marginal analysis and the cost-benefit analysis are similar, being the first term most used in Business Management and the second in Economics.
Based on this, we can conclude that when companies use marginal analysis to determine production levels, studying the effect on revenue of small changes in the number of items produced.
