Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The cost of producing one additional unit of a good or service
B
The total cost of production divided by the number of units produced
C
The fixed cost of production regardless of the output level
D
The average cost of producing all units of a good or service
Understanding the Answer
Let's break down why this is correct
Answer
Marginal cost in economics refers to the additional cost of producing one more unit of a good or service. It helps businesses understand how much more they will spend if they increase production. For example, if a factory produces 100 toys for $1,000 and wants to make one more toy, the marginal cost is the extra money spent for that additional toy, which might be $10. Understanding marginal cost is important because it helps companies decide whether producing more is worth the extra expense. By comparing marginal cost to the price they can sell the product for, businesses can make better decisions about production levels.
Detailed Explanation
Marginal cost is the extra cost of making one more item. Other options are incorrect because This option talks about average cost, not the extra cost; This option describes fixed costs, which stay the same no matter how much you produce.
Key Concepts
marginal cost
Topic
Marginal Analysis
Difficulty
easy level question
Cognitive Level
understand
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