The additional cost incurred to produce an additional unit is called which cost?

The additional cost incurred to produce an additional unit is called which cost?

• A. Fixed cost
• B. Average cost
• C. Marginal cost
• D. Sunk cost

Answer: (C)

Marginal cost is the incremental cost of producing one additional unit. It equals the change in total cost when output increases by one unit, and in the short run it mainly reflects the extra variable costs tied to that unit since fixed costs stay the same regardless of production. This distinction matters because decisions about expanding production hinge on how much extra cost is needed for each extra unit. Fixed cost is constant and does not vary with output, average cost is total cost divided by the number of units (mixing fixed and variable costs into an per-unit figure), and sunk cost is money already spent that cannot be recovered. For the added unit, the new cost that gets incurred is the marginal cost.

Marginal cost is the incremental cost of producing one additional unit. It equals the change in total cost when output increases by one unit, and in the short run it mainly reflects the extra variable costs tied to that unit since fixed costs stay the same regardless of production. This distinction matters because decisions about expanding production hinge on how much extra cost is needed for each extra unit. Fixed cost is constant and does not vary with output, average cost is total cost divided by the number of units (mixing fixed and variable costs into an per-unit figure), and sunk cost is money already spent that cannot be recovered. For the added unit, the new cost that gets incurred is the marginal cost.