What Is Marginal Resource Cost?


Quick Answer

Harper College's economics department defines marginal resource cost as the added cost created in manufacturing a product by employing an additional resource unit. Generally, the added resource unit is another worker.

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Full Answer

The Oswego State University of New York further defines the marginal resource cost by linking it to the marginal revenue product, which is the additional revenue obtained by adding an additional resource. Companies use the marginal revenue product and the marginal resource cost to determine if new workers should be hired. If the additional revenue is higher than the cost, then the additional resource unit is considered profitable. To improve profits from a product, a resource unit may be removed if the marginal resource cost is higher than the marginal revenue product for that unit.

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