Which statement defines marginal cost?

• A. The total cost of production
• B. The fixed cost per unit
• C. The average cost per unit of the last unit produced
• D. The cost to produce one additional unit

Answer: (D)

Marginal cost is the cost of producing one additional unit. It captures how total cost changes when output increases by one unit, so MC = ΔTotal Cost / ΔQuantity. Since fixed costs don’t change with output, marginal cost mainly reflects the change in variable costs for that extra unit. For example, if total cost rises from 90 to 95 when output goes from 9 to 10, the marginal cost of the tenth unit is 5. This concept guides production choices because you compare marginal cost to marginal revenue to decide how much to produce. The other ideas describe different measures: total cost is the overall expense for all units, fixed cost per unit is fixed cost divided by quantity, and the phrase about the last unit’s average cost isn’t the right way to define MC.