Definition: The additional cost of producing one more unit of a good or service.
Marginal cost is crucial for business decisions. It typically falls at first due to economies of scale, then rises as production strains capacity. The profit-maximizing rule is to produce where marginal cost equals marginal revenue (MC = MR). If producing one more unit costs less than the revenue it brings in, make it. If it costs more, stop.
Marginal analysis is the heart of AP Microeconomics. You
Category: Microeconomics