This week’s readings present significant concepts on one lesson business, extent decisions, benefits, costs, and decisions to enable better economic management to promote business performance. The powerful concepts learned from chapter two include that voluntary transactions contribute to wealth through moving assets from lower to higher valued concepts.
In the chapter, the article presents the critical relationship between costs, decisions, and benefits. In the business environment, prices are connected to organization decisions that control the organization’s operations and determine the organization’s profits. Costs and findings contribute to various consequences to the business that contributes to the organization’s benefits. Business operation is influenced by different costs, such as fixed costs that do not vary with output. Variable costs shifts as the output changes. Decisions that shifts output will contribute to change in the variable costs. In addition, providing rewards to managers as a result of an increase in economic profit promotes profitability. Also, practical cost analysis enables financial performance and accounting measures that contribute to higher organization benefits.
The next chapter refers to the extent of decisions that involve the implementation of vital choices to promote the organization’s profitability and benefit. The essential types of extent decisions that enable the organization’s success include improving advertisement measures, raising the quality of services, ensuring adequate availability of qualified staff, and increasing after-sales services to customers. Extent decisions are essential in promoting organization performance to enhance more profitability. The high costs to focus on when implementing extent decisions include marginal costs and marginal revenue, which is achieved by selling one more unit. The required method learned from this chapter is implementing marginal costs and marginal revenue in measuring the level of sales (Shorward, 2018). Where the organization is required to sell more when the marginal revenue is higher than marginal costs, the organization should also focus on selling less when marginal revenue is less compared to marginal cost. When marginal revenue is equal to marginal costs promotes maximization of profits.