How Do You 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. 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. 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. Divide the change in cost by the chan
