Final answer:
Rational people make decisions by comparing additional costs and benefits through a process called marginal analysis, which is crucial in understanding cost/benefit trade-offs and making productive decisions based on diminishing marginal utility.
Step-by-step explanation:
Rational people make decisions "at the margin" by comparing additional costs and benefits. The decision-making process involves a cost/benefit analysis, which assesses the trade-offs between what one will sacrifice and what one will gain. In particular, this process involves weighing marginal costs—the extra cost of adding an additional unit—against marginal benefits—the extra benefit of adding the same unit. Marginal decision-making helps individuals and businesses to determine how much more or less to do or produce, by analyzing the impact of a single additional unit, such as an hour of time or a dollar of cost.
When economists and rational individuals engage in this analysis, they don't simply look at total or average costs and benefits, but instead focus on how each additional unit affects their overall position. This type of analysis allows for making the most productive and beneficial decisions possible, often influenced by the principle of diminishing marginal utility, where the value of an additional unit tends to decrease as one consumes more.