Talk:Marginal cost

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[edit] Jargon needs explaining

If the jargon can't be explained, consider adding a you-need-to-have-a-background-in-[blank] very much like the prisoner's dilemma page.

[edit] Miscellaneous

I have a problem with the following quote, especially the last parts:

"Marginal cost is not the same as average unit cost. The average unit cost considers the cost of every unit. The marginal cost ignores all units except the last. For example, the average cost per car includes the heavy fixed cost to produce the first car (divided among all the cars produced). The marginal cost does not include that fixed cost at all."

To say that fixed costs are not included in the calculation of marginal costs is actually false. The formula given in the article states that we need both Total Costs and Quantity. Total Cost is derived by adding Variable AND Fixed Costs. Fixed costs most definately have a hand in marginal cost.

I'll delete this paragraph for now. ( should distinguish between short and long run marginal costs )

Dupz 04:07, 28 September 2005 (UTC)

Mathematically, of course, if fixed costs are truly fixed in the economics sense (changing quantity does not change fixed costs), then the value of MC is not related to fixed costs; since this is central to the meaning of fixed costs, it's worth including this point. This only holds when the TC formula is such that TC = FC + f(q) , where f(q) is the production function; in this case the FC term simply drops out in the first derivative.
The problem is the fixed cost definition, which can be rather loose. The usual dodge is to specify fixed as in the relevant period; therefore, fixed costs for production choices for "today" exclude almost everything except raw inputs (if I can't reduce labour today), but over the longest term feasible, there would be few if any fixed costs. Another way of looking at this is that the definition of fixed cost (as related to marginal cost and total cost) is circular: is the marginal cost related to fixed cost? If yes, then the fixed cost over the relevant time period is not fixed; adjust and repeat as necessary.--Gregalton 17:16, 12 November 2006 (UTC)


Kappa, you're quite right in your simple definition, but it's the underlying costs and trends in such marginal costs that are of greatest interest in economic theory.

Dupz 04:07, 28 September 2005 (UTC)

simple meaning of margonal cost?

  • The cost of one extra thing. Kappa 22:18, 27 September 2005 (UTC)

[edit] References?

Dupz do you have any references for your recent changes? They look a little bit like orginal research. Kappa 15:53, 28 September 2005 (UTC)

Oh, this isnt any original research Kappa. My additions were made without the aid of any references as they form standard university materials. But I'm sure I could come up with a few reputable ones, if need be...?? Dupz 16:24, 28 September 2005 (UTC)

Your graph is representing a typical average cost function as Average cost(Q) := Cost(Q) / Q look up at the german article

Guido Lüchters mail@guidoluechters.de

[edit] Rewrite and sections moved

Information in top section moved to sections below, particularly where more specific or constituting sufficiently separate or specific topics that merit further discussion below, as well as keeping intro more general.

Section added on formulas and math, to show the relationship between marginal cost, average cost and total cost. Also re-wrote to reflect impression that existed before that marginal cost is related to fixed cost; I would argue it is not, if the definition of fixed cost is properly stated. (I recognise, however, there is some circularity to the definition). The math to show this is below (although my formatting, ahem, sucks).

I also moved the section on social costs to be part of externalities, rather than the other way around. I think it might be worth considering whether externalities merit a separate section here, since this is already covered in the pages on externalities and social cost, and may not need to be repeated here. I accept it is related, but marginal costs by definition only include those costs that vary with production; if they're not included or not paid, it should be obvious it's not part of MC. That said, it does affect the efficiency conclusions, so it is important.--Gregalton 18:49, 12 November 2006 (UTC)

[edit] "incremental cost" vs. "marginal cost"

Judging by the redirect at incremental cost, are "incremental cost" and "marginal cost" synonyms? If not, what's the difference? Neonumbers 00:21, 3 October 2007 (UTC)