marginal cost

economics

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July 23, 2026

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In economics, marginal cost is the additional expense incurred to produce one more unit of a good or service. Businesses may lower prices to this cost during slow sales periods, as earning a small profit on a sale is better than no sale at all. For example, if an item costs $1.00 to produce and normally sells for $2.00, a company might sell it for $1.10 if demand is low. This concept is related to the law of diminishing returns, which suggests that increasing one input while keeping others constant will eventually lead to smaller increases in output.1234

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cost
How costs are measured
…idea in economic analysis is marginal cost, or the extra cost of producing an additional unit. A business that wants to maximize its profit will continue making products until the cost of making an additional unit (marginal cost) equals the additional profit from selling it (marginal revenue).
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…idea in economic analysis is marginal cost, or the extra cost of producing an additional unit. A business that wants to maximize its profit will continue making products until the cost of making an additional unit (marginal cost) equals the additional profit from selling it (marginal revenue).
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econometrics
…originally tested the theory that marginal cost—the addition to total cost resulting from an increase in output—first declines as production expands but ultimately begins to rise. Econometric studies, however, indicate that marginal cost tends to remain more or less constant.
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…originally tested the theory that marginal cost—the addition to total cost resulting from an increase in output—first declines as production expands but ultimately begins to rise. Econometric studies, however, indicate that marginal cost tends to remain more or less constant.
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theory of production
Marginal cost
…marginal variable cost, or simply marginal cost [MC(y)] is, roughly, the increase in variable cost incurred when output is increased by one unit; i.e., MC(y) = VC(y + 1) - VC(y). Though for theoretical purposes a more precise definition can be obtained by regarding VC(y) as a continuous function of…
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…marginal variable cost, or simply marginal cost [MC(y)] is, roughly, the increase in variable cost incurred when output is increased by one unit; i.e., MC(y) = VC(y + 1) - VC(y). Though for theoretical purposes a more precise definition can be obtained by regarding VC(y) as a continuous function of…
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total cost
…number of units produced) and marginal cost (the marginal cost of a given unit of output is the increase in the total cost required to produce that unit).
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…number of units produced) and marginal cost (the marginal cost of a given unit of output is the increase in the total cost required to produce that unit).
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