What economic principle reflects the idea that individuals make choices based on comparing the additional benefits to the additional costs?

The economic principle that highlights the notion that individuals evaluate decisions based on the comparison of additional benefits to additional costs is known as marginal analysis. This approach involves weighing the incremental benefits of a decision against the incremental costs to determine the optimal course of action.

In practical terms, marginal analysis enables individuals and firms to make informed choices that maximize utility or profit by focusing on the impact of a small change—such as producing one more unit of a good or service. For instance, a business may assess whether the extra revenue from producing one more product outweighs the additional costs associated with that production. If the benefits exceed the costs, it is rational to proceed; if not, then it is better to forgo that extra production.

Other options, while relevant to economic decision-making, do not specifically address the evaluation of additional benefits versus additional costs. Production cost refers to the total costs involved in creating a product, opportunity cost pertains to the value of the next best alternative that must be given up when making a decision, and supply and demand describe market dynamics rather than personal decision-making processes. Hence, marginal analysis is the most fitting principle in this context.