The learning activity identifies marginal decision rule as a vital determinant of a firm’s factor mix. Should the marginal gain of an additional business unit surpass its cost, the operation’s sum should be increased. If the profit is below the cost, the sum should be decreased. Net gains are maximized because marginal benefits match their costs. Thus, at the root of the economic way of thought lies the marginal decision rule. Importantly, an enterprise that maximizes profit can increase production until an additional unit marginal value is equal to its costs. A marginal gain is calculated as marginal revenue from the sale of a different unit (Gehani, 2016).
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Within the limits of their income or budget, customers seek the highest possible satisfaction. Therefore, the rule is the basis on which structural economists evaluate all decisions to ensure that a business cannot produce at any stage beyond the limits of its production ability.
For instance, the Coca-Cola Company remains competitive because of its efforts to apply the marginal decision guidelines. Gehani (2016) explains that the U.S-based firm manufactures bottles before transporting them to various packaging and distribution outlets. In the United States, the enterprise uses high-tech pieces of machinery because of the high labor cost in the region. Controversially, the operational procedure is different in developing countries compared to developed countries. The corporation takes advantage of the available cheap labor and employs many workers to oversee the successful implementation of the management’s strategic plans.
It is thus evident that Coca-Cola, Inc. applies the factor mix’s principles to ensure that they remain competitive and sustainable to benefit the future population. The company focuses on minimizing production costs and maximizing the outcomes.
Gehani, R. R. (2016). Corporate brand value shifting from identity to innovation capability: From Coca-Cola to Apple. Journal of Technology Management & Innovation, 11(3), 11-20. Web.