Marginal Cost

Marginal cost is the additional expense incurred to produce one more unit of a product or service. It helps businesses understand how much extra it will cost to increase production by a small amount. For example, if creating 10 units costs $100, and creating 11 units costs $110, then the marginal cost of the 11th unit is $10. This concept is important for decision-making, as businesses aim to produce up to the point where the cost of making one more item equals the revenue it generates.