Short Answer 
The marginal cost is the additional expense incurred from producing one more unit, vital for pricing and production decisions. To calculate it, find the change in total costs divided by the change in output quantity, and analyze production data to understand how marginal costs fluctuate with different output levels for better optimization.
Step 1: Understand Marginal Cost
The marginal cost refers to the additional cost incurred when producing one more unit of output. It highlights how expenses change with incremental production. Understanding this concept is crucial for businesses as it helps in making informed pricing and production decisions.
Step 2: Calculate Marginal Cost
To calculate the marginal cost, use the following formula. First, determine the change in total cost that occurs when output is increased. Then, divide this change by the change in quantity produced. This method provides clear insight into cost increases associated with additional production.
- Identify the increase in total cost.
- Identify the increase in quantity produced.
- Use the formula: Marginal Cost = Change in Total Cost / Change in Quantity.
Step 3: Analyze Production Data
Review the production data, such as the chart provided, to see how the marginal cost varies with different levels of output. For instance, you might observe that the cost per additional pie changes as production scales, which is essential for assessing efficiency and profitability.
- Note the marginal cost at different output levels.
- Understand how costs fluctuate with increased production.
- Use this analysis to optimize production strategies and pricing.