At a local bakery, the head baker is contemplating whether to produce an extra batch of chocolate chip cookies. After calculating the additional costs for ingredients, labor, and energy, it becomes evident that the revenue generated from selling the extra batch would not cover the increased expenses.

Question

What economic concept best describes the discouraging factor for producing the additional batch?

Variable Cost
Opoortunity Cost

Marginal Cost

Answer 1

The economic concept that best describes the discouraging factor for producing the additional batch of chocolate chip cookies, given that the revenue generated from selling it would not cover the increased expenses, is Marginal Cost.

Marginal cost refers to the additional cost incurred to produce one more unit of a good or service. In this scenario, the head baker determined that the cost of producing the extra batch is greater than the revenue it would generate, indicating that the marginal cost of that extra batch exceeds its marginal benefit (revenue).

Opportunity cost is also a relevant concept, but in this context, it primarily relates to the potential benefits lost by choosing not to produce the batch; however, the immediate decision is driven by the marginal cost not being covered by marginal revenue.

Therefore, the correct answer is Marginal Cost.