What is the marginal cost?
Enter two output levels and the total cost at each, or a fixed cost and the variable cost at each, to see the marginal cost of each extra unit and the average cost per unit.
- Marginal cost
- $4.00
Going from $320.00 to $400.00 of total cost is a marginal cost of $4.00 per unit.
- Change in total cost
- $80.00
- Change in quantity
- 20
- Starting total cost
- $320.00
- New total cost
- $400.00
- Average cost at the new quantity
- $6.67
Marginal cost: $4.00. Going from $320.00 to $400.00 of total cost is a marginal cost of $4.00 per unit.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Computes marginal cost, the extra cost of each extra unit produced, from the total cost at two quantities or from fixed and variable costs, with average cost.
Example with the default inputs (I know the Total cost, Starting quantity 40, Total cost at the start $320.00, New quantity 60, Total cost at the new quantity $400.00): Going from $320.00 to $400.00 of total cost is a marginal cost of $4.00 per unit.
Method: Marginal cost = (TC₂ − TC₁) ÷ (Q₂ − Q₁), where TC is total cost at quantity Q; from parts, TC = fixed cost + variable cost. Average cost = TC₂ ÷ Q₂.
- Fixed cost is the same at both quantities, so it cancels out of marginal cost.
- Marginal cost over a change of several units is the average cost per extra unit across that change.
- Arithmetic is exact on the typed decimals; money shows to the cent, halves up.
Worked examples
Each example is checked against the calculator on every build.
- I know the Total cost, Starting quantity 40, Total cost at the start $320.00, New quantity 60, Total cost at the new quantity $400.00 gives Marginal cost $4.00, Average cost at the new quantity $6.67.Source: OpenStax, Principles of Economics 3e, 7.3 Costs in the Short Run, Table 7.10 (MC = ΔTC ÷ ΔQ; The Clip Joint: fixed cost $160, variable cost $160 at 40 haircuts and $240 at 60, total cost 320 to 400, so $4 each). https://openstax.org/books/principles-economics-3e/pages/7-3-costs-in-the-short-run: (400 − 320) ÷ (60 − 40) = 80 ÷ 20 = 4
- I know the Total cost, Starting quantity 4, Total cost at the start $1,250.00, New quantity 5, Total cost at the new quantity $1,650.00 gives Marginal cost $400.00, Average cost at the new quantity $330.00.Source: OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price, Table 9.3 (HealthPill total and marginal cost). https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price: 1,650 − 1,250 = 400
- I know the Fixed and variable cost, Fixed cost $160.00, Starting quantity 40, Variable cost at the start $160.00, New quantity 60, Variable cost at the new quantity $240.00 gives Marginal cost $4.00, Starting total cost $320.00, New total cost $400.00.Source: OpenStax, Principles of Economics 3e, 7.3 Costs in the Short Run, Table 7.10 (MC = ΔTC ÷ ΔQ; The Clip Joint: fixed cost $160, variable cost $160 at 40 haircuts and $240 at 60, total cost 320 to 400, so $4 each). https://openstax.org/books/principles-economics-3e/pages/7-3-costs-in-the-short-run: (160 + 240) − (160 + 160) = 80
- I know the Total cost, Starting quantity 1,000, Total cost at the start $25,000.00, New quantity 1,250, Total cost at the new quantity $29,812.50 gives Marginal cost $19.25.
How it works
With total cost TC₁ at quantity Q₁ and TC₂ at Q₂:
- Marginal cost MC = (TC₂ − TC₁) ÷ (Q₂ − Q₁)
- Average cost at the new quantity = TC₂ ÷ Q₂ (shown when Q₂ is more than 0)
When you know a fixed cost FC and the variable costs VC₁ and VC₂ instead:
- TC₁ = FC + VC₁ and TC₂ = FC + VC₂
Rules:
- Quantities and costs are 0 or more, each at most 1 trillion. Quantities may have decimals.
- The two quantities must differ. The new quantity may be lower than the starting one. A change in quantity (or a new quantity) so small that the result is too large to show gives no answer.
- The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).
Assumptions
- The fixed cost is the same at both quantities.
- Marginal cost over a change of several units is the average cost per extra unit across that change.
Worked examples by hand
Haircuts, 40 to 60 a day. MC = (400 − 320) ÷ (60 − 40) = 80 ÷ 20 = $4. Average cost at 60 = 400 ÷ 60 = $6.67.
HealthPill, the 5th unit. MC = (1,650 − 1,250) ÷ (5 − 4) = $400. Average cost at 5 = 1,650 ÷ 5 = $330.
Haircuts from fixed and variable cost. TC₁ = 160 + 160 = $320, TC₂ = 160 + 240 = $400. MC = 80 ÷ 20 = $4.
1,000 to 1,250 units. Total cost goes from $25,000 to $29,812.50. MC = 4,812.50 ÷ 250 = $19.25.
Other questions people ask
What is marginal cost?
Marginal cost is the extra cost of making one more unit. When output rises by several units, it is the change in total cost divided by the change in quantity.
How do I calculate marginal cost?
Divide the change in total cost by the change in quantity. In the OpenStax haircut example, going from 40 to 60 haircuts raises total cost from $320 to $400, so marginal cost is 80 ÷ 20 = $4 a haircut.
Does fixed cost affect marginal cost?
No. Fixed cost, such as rent, is the same at every level of output, so it cancels out when you take the change in total cost. Marginal cost depends only on how variable cost changes.
What is the difference between marginal cost and average cost?
Average cost is total cost divided by all the units made. Marginal cost is the cost of the extra units only. At 60 haircuts the average cost is 400 ÷ 60 = $6.67, but the last 20 cost $4 each.
Why does marginal cost usually rise?
In the short run some inputs, such as floor space, are fixed. Adding more workers to them gives smaller and smaller gains in output (diminishing marginal returns), so each extra unit costs more.
How is marginal cost used?
A firm makes the most profit at the output where marginal cost equals marginal revenue. Use it with the marginal revenue calculator to find where producing more stops paying off.