Question

(Total cost of q units of output) - (Total cost of q - 1 units of output) = ?

• A. Average cost
• B. Marginal cost
• C. Fixed cost
• D. None of these

Hint:

Marginal cost is the additional cost of producing one more unit of output.

Answer 1

The Correct Option is B

Step 1: Understanding marginal cost.
Marginal cost is the additional cost incurred from producing one more unit of output. It is calculated by taking the difference between the total cost of producing \( q \) units of output and the total cost of producing \( q - 1 \) units. This gives the increase in cost resulting from the production of an additional unit.

Step 2: Analyzing the options.
(A) Average cost: This is incorrect. Average cost is the total cost divided by the number of units produced, not the change in total cost when one more unit is produced.
(B) Marginal cost: Correct. The change in total cost when one more unit is produced is called marginal cost.
(C) Fixed cost: Fixed costs do not change with the level of output, so they are not related to the change in cost from producing one more unit.
(D) None of these: This is incorrect, as option (B) is the correct answer.

Step 3: Conclusion.
The correct answer is (B) Marginal cost, as it is defined as the change in total cost when one more unit is produced.