Marginal cost

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Marginal Cost

Marginal cost (pronunciation: mahr-juh-nl kost) is a term used in Economics and Health Economics to describe the cost added by producing one additional unit of a product or service.

Etymology

The term "marginal" comes from the Latin word margo, meaning "edge" or "border". In economics, it refers to the effect of a small change in production. The term "cost" comes from the Latin constare, which means "to stand at something" or "to cost".

Definition

Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It is the cost of producing one more unit of a good. In the context of Healthcare, it can refer to the cost of providing one additional unit of a service or treatment.

Calculation

The marginal cost is calculated by dividing the change in costs by the change in quantity. The formula is as follows:

MC = ΔTC / ΔQ

Where:

MC is the marginal cost
ΔTC is the change in total cost
ΔQ is the change in quantity

Related Terms

  • Average Cost: The total cost divided by the number of goods produced.
  • Variable Cost: A cost that varies with the level of output.
  • Fixed Cost: A cost that does not change with the level of output.
  • Economies of Scale: The cost advantage that arises with increased output of a product.

See Also

External links

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