The Free Dictionary (reference below) defines marginal cost as the total cost to a company to produce one more unit of product, and adds:
“The marginal cost varies according to how many more or fewer units a company wishes to produce. Increasing production may increase or decrease the marginal cost, because the marginal cost includes all costs such as labor, materials, and the cost of infrastructure. For example, if a widget manufacturer increases the number of widgets it produces, it may need to buy more material, but the costs of labor and factory maintenance remain the same, and are spread out over a greater number of widgets. This may reduce the marginal cost. On the other hand, if the manufacturer hires more workers and builds another factory, it will likely increase the marginal cost. It is also known as the incremental cost.”
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The Free Dictionary, marginal cost, at http://financial-dictionary.thefreedictionary.com/marginal+cost, accessed 2 June 2017.
Page created by: Ian Clark, last modified 2 June 2017.
Image: The Free Dictionary, marginal cost, at http://financial-dictionary.thefreedictionary.com/marginal+cost, accessed 2 June 2017.