How to calculate marginal cost

What is Marginal Cost?

Marginal cost is the additional cost incurred to produce one more unit of a good or service. It’s calculated by dividing the change in total cost by the change in quantity produced.

Real-World Example:

If producing 100 widgets costs $1,000 and producing 101 widgets costs $1,015, then:

• Δ Total Cost = $1,015 – $1,000 = $15
• Δ Quantity = 101 – 100 = 1
• Marginal Cost = $15 ÷ 1 = $15 per widget