Something I have noticed over time is that there is always a mass of confusion surrounding average vs marginal costs (or benefits) in economics.
Although there is some confusion with fixed vs variable costs as well (an issue that I believe is closely related) the issue of average vs marginal costs appears ohh so often.
Now, the difference is important as it is “marginal” costs and benefits that determine decisions (implicitly) not average costs and benefits. However, if people are often confused between the two is it not possible that many people do make decisions based on the average? There are a lot of interesting questions implicit here – something we should discuss over the next week – eg do people choose marginal when describing average? does this confusion serve some “evolutionary” purpose?