Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Marginal cost
B
Total fixed cost
C
Average total cost
D
Opportunity cost
Understanding the Answer
Let's break down why this is correct
Answer
When a company thinks about producing one more unit of a product, it should focus mainly on marginal costs. Marginal cost is the extra cost of making one additional unit. This cost helps the company decide if producing that extra unit will be profitable or not. For example, if it costs $10 to make one more toy, but the company can sell it for $15, then the extra $5 is a good profit. So, by looking at marginal costs, the company can make smart decisions about increasing production.
Detailed Explanation
The company should look at the marginal cost. Other options are incorrect because Total fixed costs are the same no matter how many items are made; Average total cost looks at the cost per item but doesn't show the cost of one more item.
Key Concepts
Marginal Costs
Production Decisions
Cost Analysis
Topic
Understanding Marginal Costs
Difficulty
easy level question
Cognitive Level
understand
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