It is the change in total cost from producing an additional unit of output. It is calculated as : MCn = TCn-TCn-1
| Output | Total fixed cost | Total variable cost | Total cost | Marginal cost |
| 0 | 12 | 0 | 12 | – |
| 1 | 12 | 10 | 22 | 10 |
| 2 | 12 | 18 | 30 | 8 |
| 3 | 12 | 25 | 37 | 7 |
| 4 | 12 | 34 | 46 | 6 |
| 5 | 12 | 40 | 52 | 6 |
| 6 | 12 | 48 | 60 | 8 |
| 7 | 12 | 58 | 70 | 10 |
Relationship between Average and marginal cost
- When AC decreases, MC is lower than AC.
- Both AC and MC can be calculated from Total cost.
- When AC rises, MC is greater than AC.
- MC cuts AC from below at the latter’s lowest point.
Relationship between Total cost and marginal cost
- Marginal cost can be calculated from Total cost through the formula,
MCn= Tcn-TCn-1.
- When marginal cost is increasing, total cost increases at an increasing rate.
- When marginal cost starts to decrease, total cost increases but at a decreasing rate.
- When marginal cost is at its minimum, the total cost stops to rise at a diminishing rate.