Scenario 1-2
Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of $3,000 per week.The plant foreman observes,"Although the last 500 cigars we produced and sold increased our revenue by $7,500 and our costs by $7,000,we are only making an overall profit of $3,000 per week so I think we need to cut back on production.
-Refer to Scenario 1-2.Using marginal analysis terminology,what is another economic term for the incremental cost of producing the last 500 cigars?
A)marginal cost
B)operating cost
C)explicit cost
D)Any of the above terms are correct.

Question

Quizplus · Accepted Answer

Marginal cost is the economic term for the additional cost incurred in producing one more unit of output. In this case, the foreman is referring to the incremental cost of producing the last 500 cigars, which is an example of marginal cost. The other options, operating cost and explicit cost, are not as relevant to the situation described in the scenario.

Scenario 1-2 Suppose a Cigar Manufacturer Currently Sells 1,500 Cigars Per Week