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What is marginal cost?

Marginal cost is the cost to produce one additional unit of production. It is an important concept in cost accounting, as marginal cost helps determine the most efficient level of production for a manufacturing process. It is calculated by determining what expenses are incurred if only one additional unit is manufactured.

How does marginal cost affect average cost?

When the marginal cost is less than the average cost, the production of additional units will decrease the average cost. When the marginal cost is higher, producing more units will increase the average cost per unit. Marginal cost is often graphically depicted as a relationship between marginal revenue and average cost.

What is the difference between total cost and marginal cost?

Marginal Cost is the cost of producing an extra unit. It is the addition to Total Cost from selling one extra unit. 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.

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