Marginal cost tells us the:

• A. average cost per unit of output
• B. increase in total cost from producing one more unit of output
• C. total cost of producing all units of output
• D. difference between fixed and variable costs

Answer: (B)

Verified step by step guidance

1. Understand the definition of marginal cost: Marginal cost (MC) is the additional cost incurred when producing one more unit of output.
2. Recall that total cost (TC) is the sum of fixed costs (FC) and variable costs (VC), and marginal cost focuses on how TC changes as output changes.
3. Express marginal cost mathematically as the change in total cost divided by the change in quantity produced: \( MC = \frac{\Delta TC}{\Delta Q} \).
4. Recognize that marginal cost is not the average cost per unit, which is calculated as \( AC = \frac{TC}{Q} \), nor is it the total cost or the difference between fixed and variable costs.
5. Conclude that marginal cost specifically measures the increase in total cost from producing one additional unit of output.