The cost of producing an additional unit of a good or service that is borne by the producer of that good or service
A) always equals the benefit the consumer derives from that good or service.
B) equals the cost borne by people other than the producer.
C) is the marginal private cost.
D) is the external cost.
E) is the marginal social cost.

Question

Quizplus · Accepted Answer

The cost of producing an additional unit of a good or service that is borne by the producer is called marginal private cost. It refers to the costs directly incurred by the producer of a good or service, including labor and materials. This cost is typically lower than the marginal social cost, which includes the external costs imposed on third parties, such as pollution or congestion. Option A is incorrect because the benefit derived by consumers may be greater or less than the cost incurred by the producer. Option B is incorrect as it refers to external costs, which are not borne by the producer. Option D is incorrect because it refers to external costs, while option E is incorrect because it includes both the private costs and external costs.

The Cost of Producing an Additional Unit of a Good