Question

Marginal cost is:

A. total revenue minus total cost.
B. total revenue plus total cost.
C. the cost of producing one more unit of a good.
D. the difference between fixed and variable costs.

Answer 1

Marginal cost is the additional cost of producing one more unit of output. It is calculated by taking the change in total cost and dividing it by the change in quantity. Marginal costs are typically rising due to diminishing marginal returns.

Step-by-step explanation:

Marginal cost is the additional cost of producing one more unit of output. It is calculated by taking the change in total cost and dividing it by the change in quantity. For example, if the quantity produced increases from 40 to 60 haircuts and the total costs rise by $80, the marginal cost for each of those marginal 20 units will be $4 per haircut. Marginal costs are typically rising because additional units are more costly to produce due to diminishing marginal returns.