Pronunciation: [mˈɑːd͡ʒɪnə͡l kˈɒst] (IPA) 
The correct spelling of "marginal cost" is /ˈmɑːdʒɪnəl ˌkɒst/. The first syllable is pronounced as "mar-jin" with a long "a" sound. The "g" is hard and the "i" is short. The second syllable is "al" with a schwa sound. The word "cost" is spelled like it sounds and pronounced with a long "o" sound. In economics, marginal cost refers to the additional cost of producing one more unit of a good or service.
Marginal cost refers to the incremental cost incurred for a business or producer to produce an additional unit of a product or provide an extra service. It signifies the change in total cost resulting from a one-unit increase in output. Marginal cost can be calculated by dividing the change in total cost by the change in quantity.
Marginal cost encompasses both variable costs, which can fluctuate with changes in output, and the minimal portion of fixed costs attributed to the increase in production. It takes into account costs that are directly associated with producing a specific quantity of goods or services, such as the cost of raw materials, labor, energy, and other inputs.
Understanding marginal cost is crucial for businesses as it helps determine efficient production levels, pricing strategies, and overall profitability. By comparing the marginal cost to the marginal revenue, which represents the additional revenue generated from selling one more unit, a company can make informed decisions regarding production expansion or contraction.
Additionally, marginal cost can be useful in analyzing economies of scale. If the marginal cost is lower than the average cost, it indicates that producing more units can lead to cost savings, thus encouraging increased production. On the other hand, if the marginal cost exceeds the average cost, expanding production may result in less profitability.
By calculating and analyzing marginal cost, businesses can optimize their production processes, make informed decisions about resource allocation, and ultimately enhance their overall operational efficiency and profitability.
The word "marginal" is derived from the Latin word "marginalis", which means "bordering" or "around the edge". It comes from the Latin word "margo", meaning "margin" or "edge".
The term "cost" has its roots in the Old French word "coste", which evolved from the Latin "costa". "Costa" referred to a rib, side, or the edge of something.
Therefore, "marginal cost" combines "marginal" meaning "around the edge" or "bordering" with "cost" meaning the expense or expenditure required to produce or acquire something.
In economics, "marginal cost" specifically refers to the increase or decrease in the total cost of production resulting from producing one additional unit of a good or service. It represents the cost of producing the next item at any given level of output.
