The Marginal Cost of an Activity Is the

question 21

Multiple Choice

The marginal cost of an activity is the

• A) change in the costs of the activity divided by the change in the level of the activity.
• B) same as the total costs of the activity.
• C) ratio of total costs to the level of the activity.
• D) change in the level of the activity divided by the change in the costs of the activity.
• E) reservation costs.

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Definitions:

Marginal Cost

An alternative phrasing expressing the additional cost incurred from the production of the next unit of output.

Average Total Cost

The cost per unit is calculated by dividing the overall production cost by the quantity of units produced.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Increasing Returns to Scale

A situation in production where doubling the inputs results in more than doubling the output, leading to efficiencies and economies of scale.