For example, the marginal cost of producing an automobile will include the costs of labor and parts needed for the additional automobile but not the fixed cost of the factory building that do not change with output.
How do you calculate marginal cost?
Here’s how to find marginal cost: divide the total change in production costs with additional production by the change in the overall quantity (that is, how many more things you are producing). The marginal cost formula described above is summed up as follows: Marginal Cost = (Change in Cost) / (Change in Quantity)
What is marginal social cost?
It is the marginal private cost that is used by business decision makers in their profit maximization behavior. Marginal social cost is similar to private cost in that it includes the cost of private enterprise but also any other cost (or offsetting benefit) to parties having no direct association with purchase or sale of the product.
