### What is Marginal Cost

## >> Thursday, September 25, 2014

Marginal cost is change in total cost when we produce one more unit. If you will produce one more unit, you will see change in the total cost. It may be decrease or increase and this change will be marginal cost. In short form, we say it as MC.

Following is the formula of calculating MC

MCn = TCn - TCn-1

MCn = Marginal cost of n units of output

TCn = Total cost of n units of output

TCn-1 = Total cost of n-1 unnts of output

Or

MC = Change in total cost / Change in quantity

Example

For example

If total cost of producing 10 units is Rs.170 and total cost of producing 6 units is Rs. 200, then marginal cost will be

= 200 -170 = Rs. 30

Following is the formula of calculating MC

MCn = TCn - TCn-1

MCn = Marginal cost of n units of output

TCn = Total cost of n units of output

TCn-1 = Total cost of n-1 unnts of output

Or

MC = Change in total cost / Change in quantity

Example

For example

If total cost of producing 10 units is Rs.170 and total cost of producing 6 units is Rs. 200, then marginal cost will be

= 200 -170 = Rs. 30

Output in units | Total Fixed cost cost | Total Veriable Cost | Total Cost | Marginal Cost |

0 | 10 | 0 | 10 | (-) |

1 | 10 | 10 | 20 | 10 |

2 | 10 | 18 | 28 | 8 |

3 | 10 | 24 | 34 | 6 |

4 | 10 | 28 | 38 | 4 |

5 | 10 | 32 | 42 | 4 |

6 | 10 | 38 | 48 | 6 |

7 | 10 | 46 | 56 | 8 |

8 | 10 | 62 | 72 | 16 |