What is Marginal Cost?
A definition of Marginal Cost
“Marginal cost is the expense of producing one additional unit of a good or service. It helps businesses determine the cost associated with scaling up production while maintaining profitability.”

Business Glossary > What is Marginal Cost?
Examples of Marginal Cost in a Sentence:
The company analyzed the marginal cost to determine the feasibility of production expansion.
Understanding marginal cost is crucial for setting optimal pricing strategies.
Higher marginal costs can decrease profit margins significantly.
Why is Marginal Cost Important in Business?
Marginal cost is critical for businesses because it helps in making informed production and pricing decisions. By understanding it, businesses can optimize resource allocation and maximize profitability, especially when adjusting output levels.
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Associated Terms
Here are some associated business terms and synonyms for “Marginal Cost”:
- Incremental Cost
- Differential Cost
- Variable Cost
Tesla’s Marginal Cost
Tesla evaluates the marginal cost of producing each new electric vehicle to ensure sustainability and profitability. By assessing costs like raw materials, labor, and technology, Tesla optimizes its production processes to reduce marginal costs over time.
Final Notes on Marginal Cost
Businesses should consider fluctuating market dynamics and technology advancements that can impact marginal costs. Accurate assessment of these costs is vital for strategic planning and competitive pricing.
This has been a definition of Marginal Cost meaning.
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