In the context of production, the additional cost incurred by producing one more unit is known as _____, which is crucial for firms to determine their optimal production levels.

In production, the additional cost of making one more unit is called marginal cost. This concept is important for businesses because it helps them decide how much to produce. When a company knows the marginal cost, it can compare it to the price it can sell that extra unit for. For example, if it costs $5 to produce one more toy, but the toy can be sold for $10, the company benefits from making that extra toy. Understanding marginal costs allows firms to maximize their profits by producing the right amount of goods.