Asked by Juleny Degollado on Jun 24, 2024

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Why does the short-run marginal-cost curve eventually increase for the typical firm?

Short-Run

A period during which at least one input, typically capital, is fixed, influencing the flexibility of businesses to adjust to market changes.

Marginal-Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good varies as the quantity of production changes.

  • Comprehend the connections among total product, marginal product, average product, and their consequences for making production choices.
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Edgar ValdezJun 28, 2024
Final Answer :
The MC curve's shape is a consequence of the law of diminishing returns. Marginal cost at first declines sharply, reaches a minimum, and then rises rather abruptly. The curve's shape reflects the fact that total variable cost and therefore total cost increase at first by decreasing amounts and then by increasing amounts. For instance, if all units of a variable resource are hired at the same price, the marginal cost of each additional unit of output will fall as long as the marginal product of each additional resource is rising. Marginal cost can be found by dividing the constant cost of each additional unit of resource by the marginal product of each additional unit. But, once diminishing returns set in, the marginal product of each additional resource falls, and now when the constant cost is divided by the declining marginal product for each unit of resource, the marginal cost rises.