Definition of Marginal Cost

Marginal cost is an economics and managerial accounting concept which measures the change in the cost of production by adding one additional unit. Manufacturers often examine the cost of a new unit added to the process to achieve the economics of scales to optimize production and overall organizational processes.


If the marginal cost of production is lower than the per-unit price of the product, the producer will generate profits by lowering the variable cost and fixed cost which usually remains constant will also reduce by producing more units.

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