Which of the following statements about marginal cost is true?

Marginal cost is defined as the additional cost incurred when producing one more unit of a good or service. This concept is critical in understanding how production decisions are made; businesses will continue to produce additional units as long as the revenue from selling those units exceeds the marginal cost of their production.

The other statements do not accurately capture the essence of marginal cost. For instance, marginal cost typically does not decrease as production increases since it can vary based on factors like resource utilization and production efficiencies. It also does not represent fixed costs because fixed costs remain constant regardless of the level of output, while marginal cost specifically focuses on the variable costs associated with producing additional units. Lastly, marginal cost is not constant across different levels of output; it can change depending on the scale of production, often increasing due to factors such as diminishing returns when production hits capacity limits. Understanding these nuances helps clarify why the statement regarding marginal cost being the additional cost of producing one more unit is fundamentally correct.