Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
marginal cost
B
average cost
C
fixed cost
D
total cost
Understanding the Answer
Let's break down why this is correct
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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