MC is the marginal cost in economics. In economics and finance, marginal cost refers to the increment of total cost per unit of newly produced products (or purchased products). This concept shows that the cost per unit product is related to the total product. Marginal cost is the key concept to make enterprises operate well, because marginal cost determines the optimal production level.

Increasing marginal cost is only a description of the state, not a basic law, but a description of the state. When the actual output does not reach the limit, the marginal cost decreases with the increase of output, and when the output exceeds a certain limit, the marginal cost increases with the increase of output. Because when the output exceeds a certain limit, the total fixed cost will increase, that is, the marginal cost is inversely proportional to the marginal product of labor.

Extended data

Marginal cost, with the increase of output, the total cost decreases, thus the marginal cost decreases, which also produces the scale effect of marginal cost, but the increase and decrease trend of marginal cost is directly proportional to the increase and decrease trend of unit input and output. Marginal cost plays an important role in product decision. According to economic theory, when the output increases to the point where the marginal cost equals the marginal income, it is the output that the enterprise can obtain the maximum profit.

In marginal cost calculation, profit is directly related to sales volume, but has nothing to do with output. The calculated profit difference is just the fixed cost of the inventory products absorbed by the cost method at the end of the next period, so marginal costing can more accurately reflect the actual profit of the enterprise. Marginal cost is different from average unit cost. The average unit cost considers all products, while the marginal cost ignores the products before the last product.

Reference source; Baidu Encyclopedia-Marginal Cost