In economics, the additional cost of producing one more unit of a good is called marginal cost.
Marginal cost is calculated as the change in total cost divided by the change in quantity produced. If producing 100 units costs $1,000 and producing 101 costs $1,012, the marginal cost of the extra unit is $12.
The measure is important because firms compare the cost of an additional unit with the revenue it can generate. In the standard model of a competitive firm, profit is maximized where marginal cost equals marginal revenue, provided the firm’s operating conditions support production.
Marginal cost is different from average cost, which spreads total cost across all units. It is also different from fixed cost, which does not change with output in the short run. A factory’s electricity or materials may rise with production, while rent may remain fixed.