What term describes the additional cost of producing one more unit of a good?

The term that describes the additional cost of producing one more unit of a good is marginal cost. Marginal cost is a critical concept in economics, as it helps businesses and producers decide how much of a product to produce. When a company evaluates whether to increase production, it assesses the costs associated with producing an additional unit compared to the revenue that unit can generate. This calculation allows businesses to maximize profits by managing their production levels efficiently.

Understanding marginal cost is also important in various economic theories, such as supply and demand, where it plays a significant role in determining the optimal production level and price point for goods. By analyzing marginal cost, producers can make informed decisions that align with their profit objectives and market conditions. It effectively highlights the relationship between production quantity and cost, enabling more strategic economic planning and resource allocation.