Final answer:
The additional cost incurred from utilizing one more unit of a variable resource is called marginal cost. It is calculated by dividing the change in total cost by the change in output, representing an important factor in production and pricing decisions.
Step-by-step explanation:
The additional cost incurred as a result of utilizing one more unit of a variable resource is called the marginal cost. Marginal cost is a critical concept in economics and business, as it helps firms understand how their costs change as they increase production. We calculate marginal cost by taking the change in total cost (which is mostly composed of variable costs such as labor and raw materials) and dividing it by the change in output. Variable costs, such as those for labor and raw materials, are expenses that vary directly with the level of production. When a firm contemplates producing an additional unit of a good or service, it must consider the additional costs of utilizing more of these variable resources.
The firm will compare the marginal cost to the additional revenue gained from selling another unit to determine whether producing the additional unit is profitable. Typically, marginal costs are rising, which means that as production increases, the cost of producing each additional unit tends to be higher than the cost of producing the previous unit, especially when production approaches the capacity limit.