Can someone explain marginal cost to me???

Question

What is marginal cost? What's the difference between marginal cost and opportunity cost? What would the marginal cost of eating the 5th slice of pizza be?

Answer 1

Opportunity cost refers to the forgone alternative uses you could give a set of resources. Every resource can be destined to different alternatives, when you choose one specific use, you are sacrificing the other, and that is the opportunity cost.  For instance, you have a resource, the amount of time you can work, but there are different activities to choose from. Maybe your choices are: go to school, stay home and watch t.v., work for 10 dollars an hour.

You decide to go to school and forgo all other alternatives, so your opportunity cost is the best alternative use you could have given to your time, in this case work for 10 dollars an hour. Although watching t.v. is a possible use for your time, it is not the most profitable, and that is why working for 10 dollars an hour would be your opportunity cost. As you can see, in Economics every decision carries with it an opportrunity cost, just because every resource can be used in different ways.

Now, marginal cost is defined as the cost each additional output unit contributes to total cost. So in the pizza case, going from the 4th to the 5th slice (a one unit increase in output) would carry the additional cost (marginal cost) of lets say 300 additional calories. Those additional 300 calories are the marginal (i.e. "additional") contribution to your total calorie consumption (i.e. "total cost").

Answer 2

It is the additional cost of adding one more unit.

So the 3rd pizza slice my give you only a minor cost. The cost can be anything, whether it is your stomach being too full or you feel like you'll be fat. As long as it is a cost to you. Now, eating one more slice (4th slice) will add additional cost (more stomach aches than before). The cost that is added when eating a 4th slice, is the marginal cost i.e. the cost that is added with one additional unit.

Opportunity cost is completely different. It is the cost of doing one thing instead of another. For example, if you watch TV for 3 hours ever day, you could instead use that time to read a book. The opportunity cost of watching TV is not being able to read a book.

Answer 3

The cost of producing one more unit of output. Opportunity cost refers to what you're giving up to get something else.

It's a bit of a strange question, but the marginal cost of eating the 5th slice of pizza would be the amount of money you paid for that 5th slice.