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.
| Q | Total Cost (TC) | Marginal Cost (MC) | Average Cost (AC) |
| 1 | 10 | 10 | 10 |
| 2 | 16 | 6 | 8 |
| 3 | 23 | 7 | 7.6 |
| 4 | 32 | 9 | 8 |
| 5 | 45 | 13 | 9 |
| 6 | 66 | 21 | 11 |
- 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
Note: Marginal cost is often shaped like this in the short term because of the law of diminishing marginal returns.
