What is the marginal cost?

What is the marginal cost?

• A. The cost to make one more unit
• B. The total cost of production
• C. Only variable costs
• D. The fixed cost per period

Answer: (A)

Marginal cost is the cost of producing one more unit. It’s the increase in total cost that comes from raising output by one unit, and is calculated as MC = ΔTC / ΔQ. In the short run, fixed costs don’t change with output, so the marginal cost mainly reflects the additional variable cost of that extra unit. That’s why the description “the cost to make one more unit” fits best. Total cost is the overall cost of production, not the extra unit’s cost; fixed cost per period isn’t about the cost of producing an additional unit.

Marginal cost is the cost of producing one more unit. It’s the increase in total cost that comes from raising output by one unit, and is calculated as MC = ΔTC / ΔQ. In the short run, fixed costs don’t change with output, so the marginal cost mainly reflects the additional variable cost of that extra unit. That’s why the description “the cost to make one more unit” fits best. Total cost is the overall cost of production, not the extra unit’s cost; fixed cost per period isn’t about the cost of producing an additional unit.