Marginal Cost Of Production

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DEFINITION of 'Marginal Cost Of Production'

The change in total cost that comes from making or producing one additional item. The purpose of analyzing marginal cost is to determine at what point an organization can achieve economies of scale. The calculation is most often used among manufacturers as a means of isolating an optimum production level.

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BREAKING DOWN 'Marginal Cost Of Production'

Manufacturing concerns often examine the cost of adding one more unit to their production schedules. This is because at some point, the benefit of producing one additional unit and generating revenue from that item will bring the overall cost of producing the product line down. The key to optimizing manufacturing costs is to find that point or level as quickly as possible.

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RELATED FAQS
  1. How is the marginal cost of production used to find an optimum production level?

    The marginal cost of production can be tracked to show the optimal production level where per-unit production cost is lowest ... Read Full Answer >>
  2. What does it mean when a utility company has a natural monopoly on a market?

    In economics, a natural monopoly is defined as an industry in which production by a monopolistic company is much cheaper ... Read Full Answer >>
  3. What is the average annual growth rate of the utilities sector?

    Utilities companies are popular among investors for their stable cash flows and dividend yields. The utilities sector includes ... Read Full Answer >>
  4. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  5. Do production costs include the marginal cost of production?

    Production costs include all costs association with production. The marginal cost of production is the cost of producing ... Read Full Answer >>
  6. How do fixed and variable costs each affect the marginal cost of production?

    The total cost of a business is comprised of fixed costs and variable costs. Fixed costs and variable costs affect the marginal ... Read Full Answer >>
  7. How is marginal revenue related to the marginal cost of production?

    The marginal cost of production and marginal revenue are economic measures used to determine the amount of output and the ... Read Full Answer >>
  8. How is profit maximized in a monopolistic market?

    In a monopolistic market, there is only one firm that produces a product. There is absolute product differentiation because ... Read Full Answer >>
  9. How does volume relate to economies of scale?

    An economy of scale is the cost advantage that a company has with the increased size of output of a good or service. There ... Read Full Answer >>
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    There are three key ways companies regain market share once it has been lost: pricing changes, promotional changes and product ... Read Full Answer >>
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    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
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    A roll-up merger is the process of acquiring smaller companies within an industry to form one larger firm. To start a roll-up, ... Read Full Answer >>

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