Jaðarkostnaði

Jaðarkostnaði, a term derived from Icelandic, translates to marginal cost in economics. It represents the change in total cost that arises when the quantity produced is incremented by one unit. In simpler terms, it is the cost of producing one additional unit of a good or service.

Understanding marginal cost is crucial for businesses to make informed decisions about production levels. If the marginal cost of producing an extra unit is less than the price that can be obtained for it, then producing that unit will increase profits. Conversely, if the marginal cost exceeds the selling price, producing the additional unit would lead to a decrease in overall profit.

The calculation of marginal cost involves looking at the change in total cost divided by the change in quantity. This means that it is not simply the average cost per unit, but specifically the cost associated with the very next unit. Factors influencing marginal cost can include the cost of raw materials, labor directly involved in production, and any variable overheads that increase with output. Fixed costs, on the other hand, typically do not influence marginal cost as they remain constant regardless of the production volume within a certain range.

Economists use the concept of marginal cost in conjunction with marginal revenue (the additional revenue generated from selling one more unit) to determine the profit-maximizing output level for a firm. The optimal point is reached when marginal cost equals marginal revenue.