The techniques for calculating marginal costs in higher education are examined in detail. Marginal costs, as defined in economics, is the change in total cost associated with producing one additional unit of output. In higher education, the most frequently selected unit of output is a full-time-equivalent student or, alternatively, a student credit hour. After reviewing several aspects of the microeconomic theory of costs, detailed analysis is provided of the three basic methods of estimating marginal costs: the regression method, the fixed- and variable-cost method, and the incremental-cost method. For each method, definitions and examples of cost calculations are provided, along with information on data and analytical requirements and strengths/weaknesses. In addition, a literature review is included that indicates the following: the use of statistical costs analysis in which marginal costs are estimated is essentially the same sort of undertaking in higher education as it is in other enterprises, such as business and industry, hospitals, and primary and secondary education; the typical approach to developing specific costs functions has been pragmatic; and basic elements of the microeconomic model are seldom realized in applied work. (SW)