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Definition – What is Marginal Cost?
Marginal cost is the cost of producing one additional unit. It indicates an incremental cost change.
Formula – How to Calculate Marginal Cost
Marginal Cost = Change in Total Variable Costs ÷ Change in Quantity
Example
Change in total cost is $40 and change in quantity is 1,000.
Marginal Cost = $40 ÷ 1,000 = 0.04
Marginal Cost (MC) is 0.04.
Sources and more resources
- Wikipedia – Marginal Cost – Wiki entry on marginal cost. Includes information on how it is calculated and where it is used.
- Khan Academy – Marginal Revenue & Marginal Cost – Part of a larger course on microeconomics. This video details how marginal revenue and marginal cost are calculated, as well as what they are used for.
- ACDCLeadership (YouTube) – Marginal Cost and Average Total Cost – Micro 3.4 – A video explanation of the concept of marginal cost.