The cost of providing additional output in the long run is known as:

• A. Scale
• B. Marginal cost
• C. Average cost
• D. Sunk cost

Answer: (A)

In the long run, all inputs can be adjusted, so a firm can choose the size of its operation. The concept that describes how costs respond as you change the scale of production is scale. It captures what happens to total and average costs when you increase or decrease the size of the operation, tying into economies of scale and returns to scale. Marginal cost, by contrast, is the cost of producing one more unit at a given scale, a more specific, unit-by-unit measure. Average cost is total cost per unit, a separate way to look at cost per output. Sunk costs are past costs that shouldn’t affect current production decisions.