Marginal cost

Marginal cost is the additional cost of producing one more unit of a good or service. In continuous models, it is the derivative of total cost with respect to output.

Total cost: The full cost of producing a given quantity of goods or services, including fixed and variable costs. Marginal cost measures how total cost changes as output rises.
Profit maximization: The choice of production or sales level that yields the greatest difference between revenue and cost. A firm often expands output until marginal revenue equals marginal cost.
Average cost: Total cost divided by the quantity of output produced. Average cost describes cost per unit overall, not the cost of the next unit.
Economies of scale: A reduction in average cost as a firm increases its scale of production. Scale changes can lower costs across output levels and alter marginal-cost patterns.
Opportunity cost: The value of the best alternative forgone when a choice is made. A full marginal-cost calculation includes resources' value in their next-best use.
Marginal product: The additional output produced by using one more unit of an input while other inputs remain fixed. Diminishing marginal product can make each additional unit more expensive to produce.
Marginal revenue: The additional revenue earned from selling one more unit of output. Comparing it with marginal cost helps determine whether another unit raises profit.
Fixed cost: A cost that does not vary with output over a specified range and period. Fixed costs do not change when one additional unit is produced within that range.
Diseconomies of scale: An increase in average cost as a firm expands its scale of production. Coordination and management burdens can eventually raise the cost of additional output.
Production function: A mathematical relationship between inputs used in production and the output they generate. Input-output relationships help explain how added production changes costs.

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