Class 11 Micro Economics Notes · CBSE

Marginal Cost

Marginal Cost — understanding the cost of producing one more unit and why fixed costs do not affect it. CBSE Class 11 Microeconomics notes with formula, derivation and calculator.

Last updated: 12 Sep 2026

Notes

Meaning of Marginal Cost (MC)

Marginal Cost (MC)

Marginal cost is the addition to total cost when one more unit of output is produced. It is the cost of producing the nth unit of output.

Marginal Cost

MC_n = TC_n - TC_{n-1}

Where n = number of units produced, TC_n = Total cost of producing n units, and TC_n-1 = Total cost of producing (n−1) units.

Solved Example

Problem

If TC of producing 2 units is ₹200 and TC of producing 3 units is ₹240, then MC = 240 − 200 = ₹40.

Solution

MC of the 3rd unit = ₹40

Table 6.7: MC initially falls (due to increasing returns), then rises (due to diminishing returns).
Output (units)	TC (₹)	MC (₹) = TCₙ − TCₙ₋₁
0	12	—
1	18	6
2	22	4
3	27	5
4	36	9
5	47	11

The Other Way to Calculate MC

Marginal Cost (Alternative)

MC = \frac{\Delta TC}{\Delta Q}

Where ΔTC = Change in Total Cost, and ΔQ = Change in Output. This formula is useful when output changes by more than one unit.

Solved Example

Problem

A firm's TC increases from ₹500 to ₹620 when output increases from 10 to 12 units. Find MC.

Solution

MC = ΔTC / ΔQ = (620 − 500) / (12 − 10) = 120 / 2 = ₹60 per unit

MC Not Affected by Fixed Costs

⭐ Marginal cost is independent of total fixed cost. This is because fixed costs remain constant regardless of output, so they cancel out when we calculate the difference between two total costs.

Step 1: Start with the definition

1/4

We know that:

MC_n = TC_n − TC_n-1

And total cost is:

TC = TFC + TVC

MC Curve

MC schedule: Note how MC first falls (6 → 4) then rises (4 → 5 → 9 → 11).
Output	TC (₹)	TVC (₹)	MC (₹)
0	12	0	—
1	18	6	6
2	22	10	4
3	27	15	5
4	36	24	9
5	47	35	11

Fig: MC curve is U-shaped — it initially falls (6 → 4), then rises (4 → 5 → 9 → 11) due to the Law of Variable Proportions.

The MC curve is U-shaped. It initially falls due to increasing marginal returns to the variable factor, reaches a minimum, and then rises due to diminishing marginal returns. This is consistent with the Law of Variable Proportions.

Key Takeaways

Marginal Cost (MC) is the addition to total cost from producing one more unit: MCₙ = TCₙ − TCₙ₋₁.
MC can also be calculated as ΔTC / ΔQ — the change in total cost divided by the change in output.
MC is independent of fixed costs because TFC remains constant and cancels out in the calculation.
MC depends only on the change in TVC: MC = TVCₙ − TVCₙ₋₁.
MC curve is U-shaped due to the Law of Variable Proportions — initially falling, then rising.
MC is minimum when marginal returns are maximum.