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Reply #68: Apparently you don't know what the term "Marginal Cost" means [View All]

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Nederland Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Aug-15-08 11:41 AM
Response to Reply #67
68. Apparently you don't know what the term "Marginal Cost" means
What I said is that the marginal cost of making a chip is very small. In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. Mathematically, the marginal cost (MC) function is expressed as the derivative of the total cost (TC) function with respect to quantity (Q). Note that the marginal cost may change with volume, and so at each level of production, the marginal cost is the cost of the next unit produced.

What this means is that yes, the cost of making that first chip is very high due to high design and equipment costs, but the cost of building the next chip, or the next million chips, is very low on a per unit basis. This is not true of batteries, where marginal costs are fairly high due to much higher material costs.
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