The marginal cost of increasing phone production from 50 to 55 phones if there are 5 workers in the company is 3 handbags.
The marginal cost is the increase in price that results from a unit increase in output quantity. It is the output-relative derivative of the total cost function, to put it formally. Marginal costs are important because economic decisions are made at the margin.
The term "marginal cost" refers to the total expenses incurred in manufacturing an additional good. As a result, it can be assessed by changes in the expenditures related to each additional unit. Total Expense Change / Unit Production Change equals Marginal Cost.
Output of handbags falls from 35 to 20 as phone production rises from 50 to 55.
Marginal cost of increasing phones
= (35-20)/(55-50)
= 15/5
= 3 handbags
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