Marginal refers to the focus on the cost or benefit of the next unit or individual, for example, the cost to produce one more widget or the profit earned by adding one more worker. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.

What are optimal managerial decisions?

An optimal decision is a decision that leads to at least as good a known or expected outcome as all other available decision options. It is an important concept in decision theory. In order to compare the different decision outcomes, one commonly assigns a utility value to each of them.

Why should marginal cost equal marginal benefit at the optimal quantity?

The efficient quantity of a good is the quantity that makes marginal benefit from the good equal to marginal cost of producing it. If marginal benefit exceeds marginal cost, resources use will be more efficiently if the quantity is increased.