Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total revenue
B
Additional cost of producing one more unit
C
Average fixed cost
D
Fixed cost per unit
Understanding the Answer
Let's break down why this is correct
Answer
Average total cost relates to the overall cost of producing goods divided by the number of items produced. Similarly, marginal cost refers to the additional cost incurred when producing one more unit of a product. For example, if a factory produces 100 toys at a total cost of $1,000, the average total cost is $10 per toy. If the factory decides to produce one more toy, and it costs an extra $5, that $5 is the marginal cost for that additional toy. Therefore, while average total cost looks at the cost spread out over all items, marginal cost focuses specifically on the cost of producing one more item.
Detailed Explanation
Marginal cost tells us how much it costs to make one more item. Other options are incorrect because Total revenue is the money earned from selling products; Average fixed cost is the total fixed costs divided by the number of items made.
Key Concepts
Average Total Cost (ATC)
Marginal Cost (MC)
Total Cost (TC)
Topic
Calculating Average Total Cost
Difficulty
medium level question
Cognitive Level
understand
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