How to Work Out Marginal Cost
Marginal cost is a term in economics that refers to the amount it will cost for a firm to produce one more of a product. It is equal to the change in cost over the change in production, and is typically presented as the marginal cost curve, a graph that shows the marginal cost over all production levels. The curve represents the varying economies of scale, which is the idea that the cost to produce a single good depends on the total volume being produced. To calculate the marginal cost, you will need to know the total cost at two levels of production.
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Instructions
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Subtract the first production level from the second to get the change in production. For example, take a company that spends $1,000 to produce 100 units and $1,700 to produce 150 units. The change in production is 150 -- 100 = 50.
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Subtract the cost for the first production level from the cost at the second to get the change in cost. The change in cost for the example company is $1,700 - $1,000 = $700.
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Divide the change in cost by the change in production to get the marginal cost between those two production levels. The marginal cost for the example company is $700 / 50 = $14.
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