Marginal cost:

Marginal cost is the change in the total cost of production when one more unit is produced. It is the cost of producing one more unit of a good or service. It is calculated by dividing the change in total cost by the change in output.

Formula for marginal cost:

Marginal cost = (Change in total cost) / (Change in output)

Significance of marginal cost:

Marginal cost is an important concept in microeconomics as it helps in making production decisions. It helps the producers to determine the optimal level of production, which will maximize their profits. If the marginal cost of producing one more unit is less than the price at which it can be sold, then the producer should produce more units. If the marginal cost is greater than the price, then the producer should reduce the production level.

Difference between marginal cost and average cost:

Marginal cost is the change in total cost due to one unit change in output, while average cost is the total cost divided by the total output. Average cost is the cost per unit of output. Marginal cost helps in making short-term production decisions, while average cost helps in making long-term production decisions.

Conclusion:

Marginal cost is an important concept in microeconomics as it helps the producers to determine the optimal level of production and maximize their profits. It is the cost of producing one more unit of a good or service. It is calculated by dividing the change in total cost by the change in output.

According to Marshall's DMU
totalunit+ one extra unit =marginal unit