Marginal Cost Calculator

About this calculator

Marginal cost is the additional cost of producing one more unit of output, calculated as MC = ΔTotal Cost ÷ ΔQuantity — the change in total cost divided by the change in quantity produced. If increasing output from 100 to 101 units raises total cost from $5,000 to $5,045, the marginal cost of that unit is $45, reflecting mostly variable costs like materials and labor since fixed costs (rent, equipment) don't change with output in the short run.

Marginal cost is central to microeconomic theory: a profit-maximizing firm in a competitive market produces up to the point where marginal cost equals marginal revenue (price), and the shape of the marginal cost curve — typically U-shaped due to diminishing returns followed by rising input costs — explains why costs per unit eventually rise as a factory nears capacity. Economics students, manufacturing cost analysts, and pricing managers use marginal cost to decide whether producing additional units is still profitable at the current price.