marginal cost
A company's manager reviews a chart showing the marginal cost of producing additional units.
- Noun:
- The change in total cost that arises when the quantity produced changes by one unit: "marginal cost" is an economic term referring to the cost added by producing one additional unit of a good or service. It is a key concept for determining the optimal level of production.
- "Marginal cost" is used in business and economic contexts to analyze production efficiency and pricing. It is typically calculated by taking the derivative of the total cost function with respect to quantity or by observing the change in total cost when output changes by a single unit.
- It is a fundamental principle that, in perfect competition, price tends to equal marginal cost.
- Noun:
- The factory manager analyzed the marginal cost to decide whether to increase production.
- If the marginal cost of producing another car is lower than the selling price, the company will profit from making it.
"To calculate marginal cost": to compute the cost of producing one more unit.
- The firm must calculate the marginal cost before expanding its output.
"Marginal cost pricing": a pricing strategy where the price of a product is set equal to the marginal cost of producing it.
- Some utilities are regulated to use marginal cost pricing to promote economic efficiency.
Marginal (adj): relating to or situated at a margin or edge; in economics, involving a small change from a present level.
- The marginal benefit of the new policy was debated.
Incremental cost (n): a synonym often used interchangeably with "marginal cost," especially in managerial accounting.
- The decision was based on the incremental cost of the new feature.
- Incremental cost: The additional cost incurred from producing one more unit.
- Differential cost: The difference in total cost between two alternatives.
Marginal revenue: The additional revenue gained from selling one more unit.
- Profit is maximized where marginal revenue equals marginal cost.
Average cost: The total cost divided by the number of units produced.
- The average cost was higher than the marginal cost, indicating economies of scale had been exhausted.
A company's manager reviews a chart showing the marginal cost of producing additional units.
- the increase or decrease in costs as a result of one more or one less unit of output