In marginal analysis, what type of cost can be saved by not producing the last unit of output?

• A. Marginal cost
• B. Average cost
• C. Total cost
• D. Fixed cost

Answer: (A)

Verified step by step guidance

1. Understand the concept of marginal analysis, which focuses on the additional costs or benefits of producing one more unit of output.
2. Recall that fixed costs are costs that do not change with the level of output and cannot be saved by producing fewer units.
3. Recognize that total cost includes both fixed and variable costs, so not producing the last unit only affects the variable portion.
4. Identify that average cost is the total cost divided by the number of units produced, so it is not directly the cost saved by one unit.
5. Conclude that the cost saved by not producing the last unit is the marginal cost, which represents the additional cost of producing that unit.