When Is the Marginal Cost Horizontal?

If you own a business or are considering buying stocks of a company that produces goods, it's important to understand concepts like marginal costs. What does it mean when the marginal cost is horizontal? Let's examine the ins and outs together.

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If you have 1 billion subscribers, there's a lot more wiggle room to maintain your average marginal costs than if, say, you were producing limited runs of helicopter parts. But even with helicopter parts, you may be able to increase your prices to maintain your horizontal marginal cost curve.

The bottom line on horizontal marginal cost

Ultimately, a horizontal marginal cost curve is a give-and-take between the supplier and the consumer. The balance is extremely difficult to achieve, especially in a competitive environment, but it is not impossible.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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