A plant that produces 1000 units of some item decides to make 1001 units instead. What is the cost of this additional unit called?

Question

Quizplus · Accepted Answer

The cost of making one additional unit is the marginal cost (MC). Similarly, the expected income from selling one additional unit is the marginal revenue (MR). If the marginal revenue is higher than the marginal cost, then it makes sense to produce another unit. The equilibrium production quantity is where MC = MR: If marginal revenue and marginal cost are equal, the producer is indifferent between producing and not producing the additional unit.

A Plant That Produces 1000 Units of Some Item Decides