marginal cost: meaning, definition, pronunciation and examples
C2Formal, Technical, Academic
Quick answer
What does “marginal cost” mean?
The increase in total cost that arises from producing one additional unit of a good or service.
Audio
Pronunciation
Definition
Meaning and Definition
The increase in total cost that arises from producing one additional unit of a good or service.
In decision-making, the cost incurred by choosing one more unit of an activity. In a broader sense, it can refer to the minimal added cost or consequence of a small incremental change in any quantity.
Dialectal Variation
British vs American Usage
Differences
No significant lexical differences. The concept is identical. Spelling follows regional norms for related words (e.g., 'analyse' vs. 'analyze').
Connotations
Purely technical and neutral in both varieties.
Frequency
Equally common in business and economics contexts in both the UK and US.
Grammar
How to Use “marginal cost” in a Sentence
The marginal cost of [PRODUCT/ACTION] is [AMOUNT].[COMPANY] calculated the marginal cost.Marginal cost [VERB: exceeds/falls to] [VALUE].Vocabulary
Collocations
Examples
Examples of “marginal cost” in a Sentence
verb
British English
- The firm will marginal cost the new product line.
- They are marginal costing the expansion.
American English
- The firm will marginal cost the new product line.
- They are marginal costing the expansion.
adverb
British English
- The pricing was done marginal-costly.
- The project was evaluated marginal-cost-wise.
American English
- The pricing was done marginal-costly.
- The project was evaluated marginal-cost-wise.
adjective
British English
- The marginal-cost analysis proved crucial.
- We need a marginal cost estimate.
American English
- The marginal-cost analysis proved critical.
- We need a marginal cost estimate.
Usage
Meaning in Context
Business
Used for pricing decisions, determining optimal production levels, and evaluating the profitability of additional orders.
Academic
A fundamental concept in microeconomic theory, taught in introductory courses and used in advanced research models.
Everyday
Rarely used. Might be approximated in informal discussions about the 'extra cost' of one more item (e.g., one more guest at a party).
Technical
Precisely defined as the derivative of the total cost function with respect to quantity. Central to cost-benefit analysis and optimisation.
Vocabulary
Synonyms of “marginal cost”
Neutral
Weak
Vocabulary
Antonyms of “marginal cost”
Watch out
Common Mistakes When Using “marginal cost”
- Using 'marginal cost' to mean 'small cost'. It is specifically about the *change* in cost.
- Confusing it with 'average cost'. E.g., 'The marginal cost per unit' is often misstated when 'average cost' is meant.
- Treating it as a fixed number rather than a value that can change with each unit produced.
FAQ
Frequently Asked Questions
No. Variable cost is the total cost that varies with output. Marginal cost is the change in total cost (which includes both variable and any changes in fixed cost) for producing one more unit. For most basic models where fixed costs are constant, marginal cost is the change in variable cost.
Yes. For digital goods like software or streaming a film, the cost of serving one more customer can be virtually zero, leading to a near-zero marginal cost.
In competitive markets, prices tend to be driven down towards marginal cost. For a firm, knowing its marginal cost helps set a price floor; selling below marginal cost loses money on each additional sale.
A firm's short-run supply curve is typically its marginal cost curve above the average variable cost. This is because a profit-maximising firm will choose to produce a quantity where the market price equals its marginal cost (provided price covers variable costs).
The increase in total cost that arises from producing one additional unit of a good or service.
Marginal cost is usually formal, technical, academic in register.
Marginal cost: in British English it is pronounced /ˌmɑː.dʒɪ.nəl ˈkɒst/, and in American English it is pronounced /ˌmɑːr.dʒə.nəl ˈkɔːst/. Tap the audio buttons above to hear it.
Learning
Memory Aids
Mnemonic
Think of the MARGIN of a page—it's the extra space at the edge. MARGINAL cost is the extra cost at the 'edge' of your production, for one more unit.
Conceptual Metaphor
COST IS A PATH; MARGINAL COST IS THE SLOPE/GRADIENT OF THAT PATH.
Practice
Quiz
What does 'marginal cost' specifically refer to?