Final answer:
Marginal cost is the additional cost incurred as a result of utilizing one more unit of a variable resource. It is calculated by taking the change in total cost or variable cost and dividing it by the change in output. Comparing marginal cost to the additional revenue gained from selling another unit can help firms determine whether the marginal unit is adding to profit.
Step-by-step explanation:
Marginal cost is the additional cost incurred as a result of utilizing one more unit of a variable resource. It is calculated by taking the change in total cost or variable cost and dividing it by the change in output. For example, if the change in cost is $100 and the change in output is 10 units, then the marginal cost would be $100/10 units, or $10 per unit.
Marginal costs are typically rising because of diminishing marginal returns, which means that additional units become more costly to produce. Comparing marginal cost to the additional revenue gained from selling another unit can help firms determine whether the marginal unit is adding to profit.