Business firms use marginal analysis while making business decisions so as to maximize their profits. When the firm needs to decide regarding undertaking a new project, the firm takes up a marginal analysis of the cost and benefit associated with the project. The concept of marginal refers to the additional cost and benefits associated with additional units produced. Marginal benefit is the increase in the benefit associated with the production of an additional unit whereas marginal cost is the incremental cost when an additional unit of output is produced.