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Marginal Cost (MC)

The cost of increasing production by one extra unit.

Below depicts an example of a firm's marginal costs associated with different levels of output produced. The marginal cost curve has a 'tick' shape because for small levels of output the marginal cost falls due to exploiting productivities and efficiencies. But as output becomes too large, production costs start to escalate and this explains why very sharply for high levels of output the marginal cost curve rises.

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