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Marginal cost is the expenditure required to produce one additional unit of a product or service. This is an important concept in economics and management as strategic operational and marketing decisions are often influenced by marginal cost.
Economies of ScaleIn many cases, your marginal costs decline as you reach economies of scale. However, when a factory or facility such as a data center reaches full capacity, the marginal cost suddenly shoots up dramatically as the cost of new property, plant and equipment must be considered. In many cases, firms continue producing more units until their marginal cost approaches the market price for an item.|
Type | | Definition | The cost to produce one more unit of a product or service. | Related Concepts | |
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