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Home Cost Analysis Marginal Cost (MC)


Marginal Cost (MC):




Marginal Cost is an increase in total cost that results from a one unit increase in output. It is defined as:


"The cost that results from a one unit change in the production rate".




For example, the total cost of producing one pen is $5 and the total cost of producing two pens is $9, then the marginal cost of expanding output by one unit is $4 only (9 - 5 = 4).


The marginal cost of the second unit is the difference between the total cost of the second unit and total cost of the first unit. The marginal cost of the 5th unit is $5. It is the difference between the total cost of the 6th unit and the total cost of the, 5th unit and so forth.


Marginal Cost is governed only by variable cost which changes with changes in output. Marginal cost which is really an incremental cost can be expressed in symbols.



Marginal Cost = Change in Total Cost = ΔTC

                                                                          Change in Output        Δq


The readers can easily understand from the table given below as to how the marginal cost is computed:




Units of Output

Total Cost (Dollars)

Marginal Cost (Dollars)























MC curve, can also be plotted graphically. The marginal cost curve in fig. (13.8) decreases sharply with smaller Q output and reaches a minimum. As production is expanded to a higher level, it begins to rise at a rapid rate. 


Long Run Marginal Cost Curve:


The long run marginal cost curve like the long run average cost curve is U-shaped. As production expands, the marginal cost falls sharply in the beginning, reaches a minimum and then rises sharply.


Relationship Between Log Run Average Cost and Marginal Cost:


The relationship between the long run average total cost and log run marginal cost can be understood better with the help of following diagram:



It is clear from the diagram (13.9), that the long run marginal cost curve and the long run average total cost curve show the same behavior as the short run marginal cost curve express with the short run average total cost curve. So long as the average cost curve is falling with the increase in output, the marginal cost curve lies below the average cost curve.


When average total cost curve begins to rise, marginal cost curve also rises, passes through the minimum point of the average cost and then rises. The only difference between the short run and long run marginal cost and average cost is that in the short run, the fall and rise of curves LRMC is sharp. Whereas In the long run, the cost curves falls and rises steadily.      

Relevant Articles:

Concept of Cost of Production
Concepts of Economic Costs

Analysis of Short Run Cost of Production

Average Cost
Short Run and Long Run Average Cost Curves
Marginal Cost
Relation of Average Variable Cost and Average Total Cost to Marginal Cost

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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