Marginal Cost Calculator

Change in total cost

Change in quantity

Marginal cost

Build the change from two production levels

Enter an earlier and a later quantity and total cost; the calculator finds the change for you.

Compare against marginal revenue

Add the revenue from one more unit to see the marginal profit and the profit-max point.

Use a total cost function instead

Enter a polynomial cost function and get marginal cost from its slope (calculus).

Please input values into the fields

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Show the fixed-vs-variable pie

Split the later total cost into its fixed and variable parts.

Show the marginal-cost table

See how marginal cost changes as the size of the output change varies.

Marginal cost at different output-change sizes for your cost change
Change in quantity	Marginal cost ($)
1	0
5	0
10	0
50	0
100	0
500	0
1,000	0

Marginal cost is the cost of producing one additional unit. If a bakery already produces 500 loaves per day and it costs $80 to produce an extra 10 loaves (bringing production up to 510), then the marginal cost for those last ten loaves is $8 each. Comparing this figure with the sale price of one loaf makes it easy to decide whether or not to make that additional loaf; if the cost of producing another loaf is less than what you can sell it for, then doing so will increase your profits.

What are marginal costs?

Marginal cost is the additional cost incurred when producing one more unit of a product or providing one more service. It can be calculated directly by dividing the change in total cost by the change in quantity. Fixed costs such as rent and salaries are not included in this calculation, since they do not change with the number of units produced. Only variable costs that actually fluctuate with the level of production are taken into account. These may include higher raw material prices, longer machine run times, or increased packaging and shipping expenses.

To use this calculator:

Start with the two values you have available. Enter the change in total cost and the change in quantity to see the marginal cost per unit instantly. The calculations can also be done in reverse so that one of the three fields is left blank for the tool to calculate the missing value. If you want to know what change in costs would be required to achieve a certain marginal cost, leave the field for the cost blank.

If you have data for two different points in time, but no changes, activate both production quantities and enter the production quantity and total cost for the earlier and later point. The calculation tool will then calculate the change. If you also enter fixed costs, the average total price, average fixed price and average variable price for the later production quantity are also displayed. By activating "Marginal revenue", you can compare the cost of the next unit with the resulting income. With the "Cost function mode" you can also determine marginal costs using the slope of the cost curve.

Formula for calculating marginal cost

The central formula calculates the change in total cost divided by the change in quantity.

MC = \frac{\Delta TC}{\Delta Q} = \frac{TC_2 - TC_1}{Q_2 - Q_1}

A coffee shop produced 20,000 cups in a month at a cost of $60,000. The next month it produced 21,000 cups for a cost of $64,000. The cost increased by $4,000 while the production volume increased by 1,000 cups.

MC = \frac{64{,}000 - 60{,}000}{21{,}000 - 20{,}000} = \frac{4{,}000}{1{,}000} = 4

So, marginal cost is $4 per cup. The table below shows the individual symbols and an example of numerical values.

Symbol	Meaning	Example
TC1	Earlier total cost	60,000
TC2	Later total cost	64,000
Q1	Earlier quantity	20,000
Q2	Later quantity	21,000
ΔTC	Change in total cost	4,000
ΔQ	Change in quantity	1,000
MC	Marginal cost	4

Marginal and average costs

Average costs are the sum of fixed and variable costs divided by all units produced. Because marginal cost only applies to producing one additional unit, it can be very different from average cost. For example, a factory with high fixed costs might have an average cost of $20 per unit while the marginal cost of making 50 more units is only about $6 each. The two curves are related by a simple rule: when marginal cost is below average cost, then average cost is falling; and when marginal cost is above average cost, then average cost is rising. Both curves intersect at the minimum point on the average cost curve. This explains why the marginal cost curve passes through the minimum point of the average cost curve.

AC = \frac{TC}{Q}, \quad AFC = \frac{FC}{Q}, \quad AVC = \frac{TC - FC}{Q}

The marginal cost can be derived from the cost function.

If a total cost function is available instead of two data points, the marginal cost corresponds to the slope of this curve. For a quadratic cost function, the marginal cost is the derivative.

TC(q) = a + bq + cq^2 \;\Rightarrow\; MC = \frac{d\,TC}{dq} = b + 2cq

For example, take the case of $TC(q) = 100 + 8q + 0.2q^2$ . When production is 20 units, marginal cost as determined by the slope is $8 + 2 \times 0.2 \times 20 = 16$ dollars per unit while average cost is $\frac{100}{20} + 8 + 0.2 \times 20 = 17$ dollars. Because the shape of the derivative is smooth, it does not determine marginal costs for a range of increasing production but rather at a single point.

Why marginal cost has a U-shape

Marginal costs are rarely constant. At first, the cost per additional unit falls because existing facilities and workers whose wages have already been paid are used, leading to a downward curve. However, once capacity is exceeded, costs rise due to factors such as overtime, urgent material orders or machines running outside their optimal operating range. This is the law of diminishing returns, and it explains why the marginal cost curve has a typical U-shape. The bottom point of the U corresponds to the quantity produced at which the cost of producing an additional unit is lowest, and producers ideally strive to reach this level.

Areas of application for marginal costs

A very illustrative example is the pricing of a product. If the price falls below marginal cost, then each sale will result in a loss, no matter how high the sales volume. Another example is special orders. If a wholesaler offers you an order at $7 per unit and your average costs are $9 per unit, it may be worth taking on the order even if the marginal cost of additional production is only $5. In this case, there would be a profit of $2 per unit. It can also be beneficial to sell products that were not previously in demand. Expansion plans are based on the same logic. The shape of the curve shows when it makes sense to introduce a second shift or buy larger machines rather than stretching existing resources too thin.

Producers consider marginal costs and marginal revenues together. Marginal revenue is the amount earned by selling an additional unit. If revenues exceed marginal costs, profits will continue to rise. So it's a rule of thumb to keep producing until they're both equal. At that point, marginal revenue and marginal cost are equal, and marginal profit is zero. This is the production volume at which profit is maximized.

Tips for meaningful numbers:

Don't consider fixed costs. Rent and salaries are the same whether you produce 100 units or 200. Recalculate your values based on actual production volume. The marginal cost of 1,000 units is almost never the same as the marginal cost of 10,000 units. Also watch for bottlenecks in production capacity. If marginal costs suddenly increase, it indicates a constraint on labor, equipment or supplies. The solution isn't to take more orders; it's to invest.

Frequently asked questions

What is the difference between marginal cost and average cost?

Average costs are calculated by dividing the fixed and variable costs over each unit produced. Marginal costs, on the other hand, only refer to the production of an additional unit. In a factory with high fixed costs, for example, average cost per unit may be $20 while the marginal cost of producing 50 extra units might only be about $6.

Why do marginal costs increase after a certain point?

The reason for this is production capacity. If you produce beyond what the facilities and workers can realistically handle, then costs will rise. This may come from overtime, rush orders of materials or an increase in machine breakdowns. This phenomenon is known as the law of diminishing returns and results in a U-shaped marginal cost curve.

Should you increase production if marginal cost is below price?

In general yes, but only if the marginal cost does not exceed the price even with higher production. As long as the marginal costs are below the price, profit per unit increases. So one should continue to produce until the cost of another unit is equal to the selling price and then stop.

How do you find marginal cost from a cost function?

Marginal cost is the slope of the cost curve, i.e. its derivative. For a quadratic cost function TC(q) = a + bq + cq², marginal costs are given by b + 2cq, where q is the quantity produced.

Can marginal cost be zero or negative?

Such situations are rare. For digital products with nearly negligible reproduction costs, marginal cost can be close to zero. With discounts or subsidies, marginal cost may temporarily become negative if producing additional units is cheaper. However, for most physical goods, marginal cost remains positive and eventually increases.

Related calculators

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Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

Wikipedia: Marginal cost
Definition, formula, and the relationship to average cost.
OpenStax: Principles of Microeconomics, Cost Curves
Short-run cost curves and how marginal and average cost relate.
Khan Academy: Marginal revenue and marginal cost
How firms use MR and MC together to choose output.