Marginal Cost

 

Definition of Marginal Cost

Marginal Cost is the cost of producing an extra unit.

It is the addition to Total Cost from selling one extra unit.

QTotal Cost (TC)Marginal Cost (MC)Average Cost (AC)
1101010
21668
32377.6
43298
545139
6662111
  • For example, the marginal cost of producing the fifth unit of output is 13.
  • The total cost of producing five units is 45.
  • But, for the marginal cost, we find, the change in total cost of producing the fifth unit.
    • Total cost of 4 units 32
    • Total cost of 5 units 45
    • Marginal cost of 5th unit = 13

Diagram Showing Marginal Cost

marginal-cost

Note:  Marginal cost is often shaped like this in the short term because of the law of diminishing marginal returns.

Published November 28, 2014 | Tejvan Pettinger
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