2nd Bac - Income, marginal costs and sunk costs

 Income and marginal costs

Marginal analysis of income and costs allows the entrepreneur to visualize how total income or costs, depending on the case, are affected when it is sold or produced.

Marginal revenue is the change in total revenue due to a unit change in the quantity sold, while marginal cost is presented as the change in total cost when there is a variation of one unit in the rate of production.

Very close to these definitions are diminishing returns, which guide the entrepreneur to answer questions such as: should it be better to hire more units of a certain factor of production, such as labor, considering the same level of the other current productive factors?

According to the law of diminishing returns, when more labor is hired to increase production - holding constant the acquisitions of the other factors of production such as machines, physical space or materials - the marginal effect on the cost of production of a unit additional increases, as people who are hired do not have the necessary production facilities and will not increase production business, becoming more expensive the product or service of the entrepreneur.

https://www.youtube.com/watch?v=ucJBO9UTmwo&t=211s&ab_channel=JacobClifford

Sunk Costs

When you think about starting a business, there are start-up costs that you can't do anything about, regardless of whether or not the business is created. It is suggested that these costs be separated from the cost structure and subsequent evaluation of the entrepreneurial project.

Sunk costs are costs that were incurred in the past and can no longer be avoided today.

https://www.youtube.com/watch?v=_0eGegYjBRs&t=203s&ab_channel=JacobClifford

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