In the context of economics, what term describes incremental revenues minus incremental costs?

• A. Opportunity cost
• B. Average cost
• C. Marginal profit
• D. Total revenue

Answer: (C)

Verified step by step guidance

1. Understand the key terms involved: Incremental revenues refer to the additional revenue generated from producing one more unit of a good or service, while incremental costs are the additional costs incurred from producing that extra unit.
2. Recall that 'marginal' in economics typically refers to the change associated with producing one additional unit, such as marginal cost or marginal revenue.
3. Recognize that the term describing incremental revenues minus incremental costs is the additional profit gained from producing one more unit, which is known as 'marginal profit'.
4. Differentiate this from other terms: Opportunity cost is the value of the next best alternative foregone, average cost is total cost divided by quantity, and total revenue is the overall income from sales, not incremental.
5. Conclude that the correct term for incremental revenues minus incremental costs is 'marginal profit', as it directly measures the profit impact of producing one more unit.