Your factory makes plastic toys. Enable Java on your computer to use this applet. Enable Java on your computer to use this applet. Enable Java on your computer to use this applet. It's easy to confuse average cost with marginal cost.
Marginal cost is the cost of adding or subtracting one unit of output.
The average cost includes a portion of the fixed cost, as well as variable cost. The marginal cost includes only variable cost. Table Representation of Average Cost I'll use the Joan's Home Care numerical example from the preceding interactive tutorials. In the table below, I put the marginal cost between the columns, because it is calculated by comparing two output rates. Average cost goes directly in the columns.