The Marginal Cost reflects the economic outlay required in order to produce one more unit of a given good or service that is provided by the company. The marginal cost of a product changes as output levels increase or decrease.

• It is calculated by subtracting the Total Costs if the extra unit were produced less the Total Costs if the extra unit were not produced.

Marginal cost = Total Cost if Extra Unit Produced - Total Cost if Extra Unit is not produced