marginal cost
In economics, "marginal cost" is crucial for understanding how the cost of production changes with varying output levels, aiding in pricing and production decisions.
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Definition
B2Business
(practical, financial)The change in total production cost when the output quantity is increased by one unit.
Example
- Understanding marginal cost helps in setting competitive prices.
- If the marginal cost is lower than the selling price, producing more units can be profitable.
C1Economics
(technical, academic)The additional cost incurred to produce one more unit of a good or service.
Example
- Businesses analyze marginal cost to decide the optimal level of production.
- The marginal cost of producing the 101st widget was higher due to increased labor expenses.