Marginal Cost (MC)
The marginal cost of an additional unit of output is the cost ofthe additional inputs needed to produce that output. More formally,the marginal cost is the derivative of total production costs withrespect to the level of output.
Marginal cost and average cost can differ greatly. For example,suppose it costs $1000 to produce 100 units and $1020 to produce101 units. The average cost per unit is $10, but the marginal costof the 101st unit is $20
The EconModel applications Perfect Competition and Monopolyemphasize the roles of average cost and marginal cost curves. Theshort movie Derive a Supply Curve (40 seconds) shows an excerptfrom the Perfect Competition presentation that derives a supplycurve from profit maximizing behavior and a marginal cost curve.