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Which of the following is the additional cost incurred to produce an additional unit of a commodity?
Average variable cost
Average fixed cost
Marginal cost
Total cost
Marginal cost
Marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit. It represents the cost of the last unit produced and is calculated as the change in total cost divided by the change in quantity.
Marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit. It represents the cost of the last unit produced and is calculated as the change in total cost divided by the change in quantity.
In economic theory, this concept is a fundamental pillar of the Theory of the Firm, originally formalized in Alfred Marshall's Principles of Economics (1890).
Marginal cost curve usually intersects both the Average Variable Cost and Average Total Cost curves at their respective minimum points.
It is primarily derived from the variable costs of production as fixed costs do not change with output level.
Profit maximization for a firm occurs at the level where Marginal Revenue equals Marginal Cost (MR = MC).
Average Variable Cost is total variable cost divided by the number of units produced.
Average Fixed Cost is total fixed cost divided by the number of units produced and it continuously declines as output increases.
Total Cost is the sum of total fixed costs and total variable costs incurred at a specific level of production.
Marginal cost determines the supply curve of a firm in a perfectly competitive market.
C is correct тАФ Marginal cost specifically measures the cost incurred by producing one additional unit of a commodity.
Link this with Market Structure chapters: remember that in a perfectly competitive market, the firm's supply curve is essentially the section of the Marginal Cost curve that lies above the Average Variable Cost curve.
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