Managing Your Money

When Is the Marginal Cost Horizontal?

When Is the Marginal Cost Horizontal?

When Is the Marginal Cost Horizontal?. Marginal cost measures the cost a company incurs when producing one more unit of a good. To calculate marginal cost, subtract the total cost of producing one unit from the total cost of producing two units. The difference is marginal cost for two units. For example, if producing two clocks costs $4 and producing one costs $3.50, the company's marginal cost for producing two clocks is $0.50. When charted linearly, a marginal cost trends horizontally when marginal costs are constant. A company's marginal cost curve is horizontal when its marginal cost does not change no matter how many units of a product it produces.
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