The standard microeconomics metric measuring the cost of producing one additional unit of output.
How it works
The change in total cost between two production levels is divided by the change in quantity produced.
What this does not include
This does not include fixed versus variable cost breakdowns — marginal cost is calculated from total cost changes regardless of how those costs are categorized.
How to use this calculator
- Enter the total cost and quantity at two different production levels.
A worked example
Producing 100 units costs $1,000; producing 110 units costs $1,150: marginal cost = (1,150 − 1,000) ÷ (110 − 100) = $15 per unit for that last batch.
Producing 50 units costs $500; 52 units costs $520: marginal cost = $10 per unit.
What the variables mean
| Variable | Meaning |
|---|---|
| Cost 1, Quantity 1 | Total cost and quantity at the starting production level |
| Cost 2, Quantity 2 | Total cost and quantity at the new production level |
Edge cases worth knowing
Marginal cost is the cost of the next unit, not the average cost per unit. A business can have a low average cost overall while facing a much higher marginal cost for expanding production further.
Equal quantities make the marginal cost undefined — with no change in output, there’s no “next unit” to measure the cost of.
Frequently asked questions
Why does marginal cost matter for business decisions?
Comparing marginal cost to marginal revenue helps determine the most profitable production level — producing more only makes sense while marginal revenue exceeds marginal cost.
Can marginal cost decrease as production increases?
Yes — economies of scale can lower the cost of each additional unit as production volume grows, at least up to a point.
Is marginal cost the same as average cost?
No — average cost is total cost divided by total quantity; marginal cost is specifically the cost of just the next additional unit, which can differ significantly from the average.
