📚 Learning Guide
Marginal Analysis in Economics
easy

In marginal analysis, the comparison of the additional costs incurred from producing one more unit is referred to as __________.

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Learning Path
Learning Path

Question & Answer
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2
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Choose the Best Answer

A

marginal cost

B

average cost

C

fixed cost

D

total cost

Understanding the Answer

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Answer

In marginal analysis, the comparison of the additional costs incurred from producing one more unit is called marginal cost. This concept helps businesses decide whether it is worth making more of a product. For example, if a factory finds that producing one more toy costs an extra $5, that $5 is the marginal cost. By comparing this cost to the additional revenue earned from selling that toy, the factory can determine if it's a good idea to produce more. Understanding marginal cost is essential for making smart economic decisions about production.

Detailed Explanation

Marginal cost is the extra cost of making one more item. Other options are incorrect because Average cost looks at the total cost divided by the number of items made; Fixed cost stays the same no matter how many items you make.

Key Concepts

Marginal Analysis
Cost-Benefit Comparison
Resource Allocation
Topic

Marginal Analysis in Economics

Difficulty

easy level question

Cognitive Level

understand

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