Marginal Costs and Sunk Costs
Marginal Cost is the incremental change in the total cost that arises when the quantity produced is incremented by one unit; that is, it is the cost of producing one more unit of a good.
Marginal Cost is the incremental cost associated with the production of the next unit of output. Marginal costs include all the costs that vary with the level of production. Costs that do not vary with the level of production are Fixed Costs. Costs that vary with the level of production are Variable Costs. For example, the marginal cost of producing an automobile will generally include the variable costs of labor and parts needed for the production of the additional automobile but not the fixed costs of the factory that have already been incurred.
Marginal Revenue is the revenue or value gained by producing one additional unit of a good or service. An organization that is seeking to maximize its profits should produce up to the point where the marginal cost equals...
