What refers to the cost incurred by producers when increasing the production of a good or service?

The concept of marginal costs is key to understanding how producers make decisions about increasing production. Marginal cost refers to the additional cost that a producer incurs when they produce one more unit of a good or service. It provides vital information about the relationship between production levels and costs, allowing producers to determine the most efficient level of output.

When analyzing marginal costs, producers can evaluate whether the price they receive for additional units exceeds the cost of producing those units. If the price is above the marginal cost, it can enhance profitability; if it's below, it may signal a need to adjust production levels.

In contrast, fixed costs are expenses that do not change with the level of output, while variable costs fluctuate with production volume, and opportunity costs represent the benefits that are foregone when choosing one option over another. Therefore, marginal costs specifically highlight the incremental expenses associated with producing additional goods or services, making it the correct choice.