When a firm calculates the cost of producing one additional unit of a good, this is referred to as the __________ cost.

When a firm wants to understand the cost of producing one more unit of a good, it calculates what is called the marginal cost. This cost helps the firm decide if making that extra unit is worth it based on how much it will cost compared to how much money it might make. For example, if a toy factory finds that producing one more toy costs $5, that $5 is the marginal cost. If they can sell the toy for $10, then making that extra toy is a good idea because they will make a profit. Understanding marginal costs helps businesses make smart decisions about production.