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Marginal Analysis and Its Application in the Design and Operation of Open Pit Metal Mines

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Marginal Analysis and Its Application in the Design and Operation of Open Pit Metal Mines




             
Marginal Analysis and Its Application in the Design and Operation of Open Pit Metal Mines

In the pursuit of most business activities, the return that can be realized from the activity diminishes as the scale of the activity increases beyond some point of inflection that you can see on a production cost per unit graph.   Increasing the scale of business activities beyond the point of inflection usually requires an injection of additional resources like capital, energy, and labor in quantities that are disproportionate to the resulting change in output.   This is known as the Principle of Diminishing Returns.   For all activities subject to diminishing returns, there is some optimal level of the activity that will yield the best financial performance.   Successful managers know how to find this optimum level of activity so they can direct their organization to operate at its peak potential.
Marginal analysis is a tool managers can use to optimize decisions regarding activities with diminishing returns.   It involves calculating the incremental benefit of pursuing the next unit of activity and comparing that with the incremental cost associated with pursuing the next unit of activity.   The optimal activity level then is the level where the incremental cost is equal to the incremental benefit. (Baye & Prince, 2014)
One industry where marginal analysis is used extensively is mining.   Coupled with rigorous modeling of mining costs and intimate knowledge of the quality of the ore body, marginal analysis can be used to determine the economic limits of the mine.   This is an important concept to grasp for the people who design and operate mines. (Society for Mining, Metallurgy, and Exploration, Inc., 1992)  
The economic limits are an intangible boundary around an ore body beyond which is not economical to continue mining it.   It represents the set of...

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"Marginal Analysis and Its Application in the Design and Operation of Open Pit Metal Mines". Anti Essays. 12 Dec. 2018

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Marginal Analysis and Its Application in the Design and Operation of Open Pit Metal Mines. Anti Essays. Retrieved December 12, 2018, from the World Wide Web: http://parimatchstavki7.com/free-essays/Marginal-Analysis-And-Its-Application-In-600491.html