The additional cost incurred by producing an additional unit of output is known as
Answer Details
The additional cost incurred by producing an additional unit of output is known as the marginal cost. In other words, it is the cost of producing one more unit of a product or service. Marginal cost includes the cost of any additional resources required to produce the next unit, such as materials, labor, and energy.
For example, if a bakery produces 10 loaves of bread and the total cost is $50, and then produces 11 loaves of bread and the total cost becomes $55, then the marginal cost of producing the 11th loaf of bread is $5. This means that the cost of producing each additional unit of output is the marginal cost.
Understanding marginal cost is important for businesses as it helps them make decisions about how much to produce and sell. By comparing the marginal cost with the price at which the product is sold, businesses can determine whether it is profitable to produce additional units of output or not. If the marginal cost is less than the selling price, it may be profitable to produce more. Conversely, if the marginal cost is higher than the selling price, it may be more profitable to produce fewer units or to not produce any more at all.