# What is the marginal cost?

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.

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## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| from | I know the | Whether you know the total cost at each quantity, or a fixed cost and the variable cost at each. |
| fc | Fixed cost | Costs that do not change with output, such as rent. |
| q1 | Starting quantity | Units produced. |
| c1 | Total cost at the start | Everything it costs to make the starting quantity. |
| v1 | Variable cost at the start | Costs that rise with output, at the starting quantity. |
| q2 | New quantity | Units produced. |
| c2 | Total cost at the new quantity | Everything it costs to make the new quantity. |
| v2 | Variable cost at the new quantity | Costs that rise with output, at the new quantity. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| mc | Marginal cost | Change in total cost ÷ change in quantity: cost per extra unit. |
| dCost | Change in total cost | New total cost − starting total cost. |
| dQuantity | Change in quantity | New quantity − starting quantity. |
| cost1 | Starting total cost | Total cost at the starting quantity. |
| cost2 | New total cost | Total cost at the new quantity. |
| average | Average cost at the new quantity | New total cost ÷ new quantity. |

## 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.

## Assumptions

- 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

1. from = total, q1 = 40, c1 = $320.00, q2 = 60, c2 = $400.00 gives mc = $4.00, average = $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.
2. from = total, q1 = 4, c1 = $1,250.00, q2 = 5, c2 = $1,650.00 gives mc = $400.00, average = $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.
3. from = parts, fc = $160.00, q1 = 40, v1 = $160.00, q2 = 60, v2 = $240.00 gives mc = $4.00, cost1 = $320.00, cost2 = $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.
4. from = total, q1 = 1,000, c1 = $25,000.00, q2 = 1,250, c2 = $29,812.50 gives mc = $19.25.

## FAQ

### 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.

## Sources

- OpenStax, Principles of Economics 3e, 7.3 Costs in the Short Run: MC = ΔTC ÷ ΔQ, and Table 7.10 (The Clip Joint: fixed cost $160; variable cost $160 at 40 haircuts and $240 at 60; total cost $320 and $400). https://openstax.org/books/principles-economics-3e/pages/7-3-costs-in-the-short-run (retrieved 2026-10-05)
- OpenStax, Principles of Economics 3e, 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price, Table 9.3: HealthPill total cost of $1,250 at 4 units and $1,650 at 5. https://openstax.org/books/principles-economics-3e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price (retrieved 2026-10-05)