Final answer:
Marginal cost is the change in total cost given a change in output, important for understanding whether additional production is profitable.
Step-by-step explanation:
The change in total cost given a change in output is known as marginal cost. We calculate marginal cost by dividing the change in total cost by the change in output, for each possible change in output. Marginal costs typically tend to rise and are important in determining whether producing an additional unit of a product is adding to a firm's profit by comparing it to additional revenue gained. It is calculated by dividing the change in total cost (or the change in variable cost) by the change in output. Marginal costs are typically rising, and comparing marginal cost to additional revenue can help determine if the marginal unit is adding to profit. Note that the marginal cost of the first unit of output is always the same as total cost, because there are no previous costs to compare it to. Fixed costs do not vary with output, while variable costs do. This distinction is crucial for a business when calculating costs and making production decisions.