Marginal Cost

As before, we want to focus particularly on the marginal variation. In this case, of course, it is marginal cost. Marginal cost is defined as

As usual, Q stands for (quantity of) output and C for cost, so Q stands for the change in output, while C stands for the change in cost. As usual, marginal cost can be interpreted as the additional cost of producing just one more ("marginal") unit of output.

Let's have a numerical example of the Marginal Cost definition to help make it clear. In the John Bates Clark style example we have been using, total cost is 280000 for an output of 3120, and it is 33000 for an output of 3625. So we have

and

so that

for a marginal cost of $99.01 for the next unit produced. As usual, this is an approximation, and the smaller the change in output we use, the better the approximation is.