Marginal cost
Also called: MC · Topic: Production Function, Returns and Costs · NCERT: Beyond NCERT
Meaning
Marginal cost (MC) is the addition to total cost from producing one more unit of output. MC = ΔTC / Δq = TC(q) − TC(q − 1) In the short run, fixed cost does not change, so MC is just the change in variable cost. The sum of all MCs equals total variable cost. Short-run MC is U-shaped, the mirror of marginal product (MC = w / MP_L, where w is the wage). MC cuts AVC and SAC from below at their lowest points.
Example
In NCERT's Table 3.3, total cost rises from ₹67 at 7 units to ₹80 at 8 units, so the MC of the 8th unit is ₹13.
Don't confuse with
- Average cost: this is total cost divided by output. MC is the cost of the last unit only. Average cost falls while MC is below it and rises once MC is above it.