Question

is marginal cost the addition to total cost associated with the production of one additional unit of output?

Answer 1

marginal cost is the change in the total cost that arises when the quantity produced is increased by one unit; that is, it is the cost of producing one more unit of a good.In other words, marginal cost at each level of production includes the cost of any additional inputs required to produce the next unit. . It is derived from the variable cost of production, given that fixed costs do not change as output changes, hence no additional fixed cost is incurred in producing another unit of a good or service once production has already started.Marginal cost will tend to fall at first as output increases, but quickly rise as marginal returns to the variable factor inputs will start to diminish, which makes the marginal factors more expensive to employ. This is referred to as the ‘law of diminishing marginal returns’.