Which of the following best describes how marginal cost (MC) is calculated?

• A. MC is the change in total cost divided by the change in quantity produced: MC = ΔTC / ΔQ
• B. MC is the change in total revenue divided by the change in quantity sold: MC = ΔTR / ΔQ
• C. MC is the change in fixed cost divided by the change in quantity produced: MC = ΔFC / ΔQ
• D. MC is the total cost divided by the total quantity produced: MC = TC / Q

Answer: (A)

Verified step by step guidance

1. Understand that marginal cost (MC) measures the additional cost incurred when producing one more unit of output.
2. Recall the definition of total cost (TC), which includes both fixed and variable costs associated with production.
3. Recognize that fixed costs (FC) do not change with the level of output, so changes in cost come from variable costs.
4. Use the formula for marginal cost: \( MC = \frac{\Delta TC}{\Delta Q} \), where \(\Delta TC\) is the change in total cost and \(\Delta Q\) is the change in quantity produced.
5. Note that marginal cost is not related to total revenue (TR) or fixed cost (FC) changes, and it is not simply the average cost (TC divided by Q).