marginal cost

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Related to Marginal costs: Marginal revenue, Opportunity costs

Marginal cost

The increase or decrease in a firm's total cost of production as a result of changing production by one unit.

Marginal Cost

The total cost to a company to produce one more unit of a product. 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.

marginal cost

The additional cost needed to produce or purchase one more unit of a good or service. For example, if a firm can produce 150 units of a product at a total cost of $5,000 and 151 units for $5,100, the marginal cost of the 151st unit is $100. Industries with sharply declining marginal costs tend to be made up of firms that engage in price wars to gain market share. For example, the airlines often discount fares to fill empty seats with customers from competing airlines. Also called incremental cost.

marginal cost

the extra cost that is incurred by a firm in increasing OUTPUT by one unit. Given that FIXED COSTS do not vary with output, marginal costs are entirely marginal VARIABLE COSTS. Marginal cost generally includes the DIRECT MATERIALS and DIRECT LABOUR COST of a product along with VARIABLE OVERHEADS. See MARGINAL REVENUE.
Marginal costclick for a larger image
Fig. 114 Marginal cost.

marginal cost

the extra cost (addition to TOTAL COST) that is incurred in the SHORT RUN in increasing OUTPUT by one unit. Given that FIXED COSTS do not vary with output, marginal costs (MC) are entirely marginal VARIABLE COSTS. MC falls at first, reflecting increasing RETURNS TO THE VARIABLE-FACTOR INPUT so that costs increase more slowly than output, as shown in Fig. 114. However, MC then rises as decreasing returns set in so that costs increase faster than output.

MC together with MARGINAL REVENUE determine the level of output at which the firm attains PROFIT MAXIMIZATION.

References in periodicals archive ?
The intuition of (18) will be developed further below (see Equation (24)) but for now notice at the optimum that the marginal value of an R&D dollar (19) is equal to 1 (the marginal cost of an R&D dollar).
(15.) While focusing on continuing exporters allows us to best isolate the role of marginal costs. Section B of Appendix SI (Supporting Information) provides additional evidence that our findings hold for firms that switch in to and out of export markets as well, consistent with our increasing marginal cost interpretation.
For simplicity, we make the following assumptions for each node: the marginal cost is equal to local output and the production capacity is 15 MW.
Marginal cost pricing represents the additional cost caused by operating an additional train.
In recent work with Severin Borenstein, I use nationally representative data to calculate the distributional impact of a transition to marginal cost pricing in U.S.
Our case applications show that the first-stage (RA-based) estimates of suppliers' marginal costs are already closer to those made by the suppliers than the corresponding estimates based on DEA.
Firm 2 knows that his own marginal cost is [c.sub.2.sup.H] or [c.sub.2.sup.L], but Firm 1 only knows that the probability of [c.sub.2] = [c.sub.2.sup.L] is 1-[theta], then Firm 1 knows that the probability of [c.sub.2] = [c.sub.2.sup.H] is [theta], where [theta] is also common knowledge.
To identify the global minimum, the intersection of Equation (5) for both local solutions is calculated, which gives a unique solution for [d[eta].sup.opt.sub.powertrain] as a function of marginal costs as shown in Equation (8):
Oil bulls will argue that marginal costs put a natural floor under the market at $90-100 per barrel for Brent (and a little lower for WTI) and help re-establish the case for taking a positive view for the market in the short to medium term.
With this, it follows that key questions for assessing potential anticompetitive effects of a linked pricing strategy are whether or not rival firms remain in business and, if they do, have their marginal costs increased?
More intuitively, the NKPC parameters are estimated by a regression of inflation on the sum of discounted future expected marginal costs. The likelihood function corrects the bias that arises from the endogeneity of the marginal cost regressor.
The marginal costs of carbon sequestration: Implications of one greenhouse gas mitigation activity.