What Are The Concepts Of Marginal Costs And Marginal Benefits?
Marginal cost is very important in businesses because it helps the companies in making important decisions of the company. It is the change in the total cost of the company which can arise when the quantity of the units produced is changed by one unit. Marginal cost is usually defined as the derivative of the total cost with respect to the quantity. It can change with the change in the production and volume. For example, if a company estimates that for each new unit production the company incurs marginal cost of $2 then it means that the company if go from 98 to 99 units then its cost will increase by $2. Similarly, marginal profit is the dollars earned with the production of each additional unit such as if $3 is the marginal profit then it means that with one unit increase in production you can earn additional $4.
