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Marginal Cost definitions

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  • Marginal Cost
    Represents the extra expense from producing one more unit, found by dividing the change in total cost by the change in output.
  • Total Cost
    Sum of all expenses incurred in production, including both fixed and variable components.
  • Variable Cost
    Expense that changes with the level of output, such as wages paid to workers.
  • Fixed Cost
    Expense that remains constant regardless of output, like daily oven rental.
  • Quantity
    Number of units produced, often measured as pizzas in the example.
  • Marginal Product
    Increase in output resulting from adding one more worker, calculated as the change in quantity.
  • Marginal Cost Curve
    Graphical representation showing how extra production costs change as output increases, typically forming a U shape.
  • Diminishing Returns
    Phenomenon where adding more workers leads to smaller increases in output, causing extra costs to rise.
  • Wage
    Payment to workers, treated as a variable cost in production calculations.
  • Output
    Total amount produced, such as the number of pizzas made.
  • Inverse Relationship
    Situation where one variable rises as another falls, seen between marginal product and extra production costs.
  • U-Shaped Curve
    Pattern on a graph where costs decrease initially, then increase sharply, typical for extra production costs.
  • Change in Total Cost
    Difference in overall expenses when output increases, often due to hiring additional workers.
  • Change in Quantity
    Difference in the number of units produced when more resources are added.