If the market mechanism is efficient, the marginal cost accurately measures the opportunity cost of a good or service.

Question

Quizplus · Accepted Answer

Marginal cost represents the increase in the total cost of production when one more unit of output is produced. If the market mechanism is efficient, the marginal cost will reflect the actual opportunity cost of producing an additional unit because firms will only produce up to the point where the marginal cost equals the price consumers are willing to pay. This means that resources are being used in the most efficient manner possible.

If the Market Mechanism Is Efficient, the Marginal Cost Accurately