What is the difference between average cost and marginal cost?

There is a
difference between average cost and marginal cost.  The average cost of a product is the total
cost of making a product divided by the total number of products made.  If a company produces
500 hats and spends 3000 dollars to make the hats,  the average cost of each hat is 3000 divided
by 500 which is 6 dollars per hat.  Marginal cost is change in total costs which occur when an
additional unit of the product is made by the company.  Using the example above, if the company
making hats decides to make 501 hats instead of 500 hats, and the total cost for 501 hats is
3050 dollars, the marginal cost would be 50 dollars for the 501st hat produced.  Since 500 hats
costs 3000 dollars and 501 hats costs 3050 dollars, the marginal cost is the additional 50
dollars spent to make one additional hat.  There is a difference between average cost and
marginal cost.

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