In economics and finance, **marginal cost** is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. If the good being produced is infinitely divisible, so the size of a marginal cost will change with volume, as a non-linear and non-proportional cost function includes the following:

- variable terms dependent to volume,
- constant terms independent to volume and occurring with the respective lot size,
- jump fix cost increase or decrease dependent to steps of volume increase.

In practice the above definition of marginal cost as the change in total cost as a result of an increase in output of one unit is inconsistent with the differential definition of marginal cost for virtually all non-linear functions. This is as the definition finds the tangent to the total cost curve at the point q which assumes that costs increase at the same rate as they were at q. A new definition may be useful for marginal unit cost (MUC) using the current definition of the change in total cost as a result of an increase of one unit of output defined as: TC(q+1)-TC(q) and re-defining marginal cost to be the change in total as a result of an infinitesimally small increase in q which is consistent with its use in economic literature and can be calculated differentially.

In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit. If producing additional vehicles requires, for example, building a new factory, the marginal cost of those *extra* vehicles includes the cost of the new factory. In practice, the analysis is segregated into short and long-run cases, and over the longest run, all costs are marginal. At each level of production and time period being considered, marginal costs include all costs that vary with the level of production, and other costs are considered fixed costs.

If the cost function is differentiable joining, the marginal cost is the cost of the next unit produced referring to the basic volume.

If the cost function is not differentiable, the marginal cost can be expressed as follows.

A number of other factors can affect marginal cost and its applicability to real world problems. Some of these may be considered market failures. These may include information asymmetries, the presence of negative or positive externalities, transaction costs, price discrimination and others.

Read more about Marginal Cost: Cost Functions and Relationship To Average Cost, Economies of Scale, Perfectly Competitive Supply Curve, Decisions Taken Based On Marginal Costs, Relationship To Fixed Costs, Externalities

### Famous quotes containing the words marginal and/or cost:

“Most works of art are effectively treated as commodities and most artists, even when they justly claim quite other intentions, are effectively treated as a category of independent craftsmen or skilled workers producing a certain kind of *marginal* commodity.”

—Raymond Williams (1921–1988)

“If music in general is an imitation of history, opera in particular is an imitation of human willfulness; it is rooted in the fact that we not only have feelings but insist upon having them at whatever *cost* to ourselves.... The quality common to all the great operatic roles, e.g., Don Giovanni, Norma, Lucia, Tristan, Isolde, BrÃ¼nnhilde, is that each of them is a passionate and willful state of being. In real life they would all be bores, even Don Giovanni.”

—W.H. (Wystan Hugh)