Define the term 'marginal cost'.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2022). The mark or mark type is shown in brackets.

1. [2] The extra cost of producing one more unit of output.
2. [2] Formula Change in total cost of output / Change in quantity of output.
3. [1] Cost of making more products.
4. [1] Producing one more product / unit of output.
5. [1] Extra variable costs.
6. [1-3] Identify the effect of changes in the fixed or variable costs and revenues.
7. [1-3] Identify how changing circumstances will affect the break-even point and margin of safety to decide whether this is acceptable.
8. [1-3] Explore different scenarios using amended costs and revenues.
9. [1-3] Deciding whether to launch a new product.
10. [1-3] Marketing decision – impact of a price increase.
11. [1-3] Operations management decision – purchase of new equipment with lower variable costs.
12. [1-3] Choosing between two locations for a new factory.