If marginal revenue falls below marginal cost, the cost of producing additional units becomes higher than the revenue generated by their sale, and a company will generally halt production.

For instance, if a factory produces 100 widgets at a total cost of $1,000—and producing 101 widgets costs $1,009 in total—the marginal cost of that one extra widget is $9.

Marginal cost is the increase in total costs resulting from a unit increase in production. ... The formula to calculate marginal cost is then applied: 175,000 / 2,500 = $70.