Which of the following best defines marginal cost?

• A. The increase in total cost that results from producing one additional unit of output.
• B. The cost of all inputs used in production.
• C. The decrease in total cost when production is reduced by one unit.
• D. The total cost divided by the number of units produced.

Answer: (A)

Verified step by step guidance

1. Understand that marginal cost (MC) measures the change in total cost when the quantity of output changes by one unit.
2. Recall 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.
3. Recognize that marginal cost focuses on the additional cost incurred from producing one more unit, not the total cost or average cost.
4. Compare the given options to the definition and formula of marginal cost to identify which one correctly describes this concept.
5. Conclude that the best definition of marginal cost is the increase in total cost that results from producing one additional unit of output.