Marginal Cost

Marginal cost is the cost of producing one more unit of output.

For example, if an airplane is about to take off and it is only half full, the cost of adding one more passenger is almost zero. So it makes sense for the airline to sell tickets for the empty seats at a huge discount, even if the price is below the average cost per seat. The alternative would be to leave the seats empty and stick to the normal selling price, but the airline will be worse off.

Marginal cost is the cost of producing one more unit of output

When making decisions, it is always important to include only the costs and benefits that arise from the decision.

References

Karl E. Case, Ray C.Fair, Principles of economics.  Seventh Edition, Pearson Prentice Hall, 2004, Chapter 1

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