Answer Posted / fazilhari
The marginal cost of an additional unit of output is the
cost of the additional inputs needed to produce that
output. More formally, the marginal cost is the derivative
of total production costs with respect to the level of
output.
The marginal cost of production is the increase in total
cost as a result of producing one extra unit. The concept
of marginal cost in economics is similar to the accounting
concept of variable cost. It is the variable costs
associated with the production of one more unit.
Marginal costs are not constant. For example a factory may
be operating at the highest capacity it can with all
workers working normal full time hours, so increasing
production by one more unit would mean paying overtime, so
the marginal cost would be higher than the current variable
cost per unit.
Conversely, an input may become cheaper as the quantities
purchased rise (e.g. quantity discounts), so marginal costs
may fall as production increases.
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