Marginal Cost

Marginal cost is the amount at any given volume of output by which total costs are changed if the volume of output is increased or decreased. It is the cost of making one extra  unit of output. The definition stresses the manner in which costs behave in relation to the volume of activity. It concerns  the identification of variable and fixed costs  ie. the costs that increase or decrease as output increases or decreases. Only the variable costs both production and non-production change as the output changes.