what is marginal cost 
in economics marginal cost is the change in total production cost that comes from making or producing one additional unit to calculate marginal cost divide the change in production costs by the change in quantity the purpose of analyzing marginal cost is to determine at what point an organization can achieve economies of scale to optimize production and overall operations if the marginal cost of producing one additional unit is lower than the per unit price the producer has the potential to gain a profit madelyn goodnight investopediaformula and calculation of marginal costmarginal cost is calculated as the total expenses required to manufacture one additional good therefore it can be measured by changes to what expenses are incurred for any given additional unit marginal cost change in total expenses change in quantity of units producedthe change in total expenses is the difference between the cost of manufacturing at one level and the cost of manufacturing at another for example management may be incurring 1 000 000 in its current process should management increase production and costs increase to 1 050 000 the change in total expenses is 50 000 1 050 000 1 000 000 the change in the quantity of units is the difference between the number of units produced at two varying levels of production marginal cost strives to be based on a per unit assumption so the formula should be used when it is possible for a single additional unit to be produced for example the company above manufactured 24 pieces of heavy machinery for 1 000 000 the increased production will yield 25 total units so the change in the quantity of units produced is one 25 24 the formula above can be used when more than one additional unit is being manufactured however management must be mindful that groups of production units may have materially varying levels of marginal cost 