Why is the marginal cost curve U-shaped?
Understand the Problem
The question is asking for an explanation of why the marginal cost curve takes on a U shape. This involves discussing the relationship between production levels and costs, particularly how marginal costs initially decrease and then increase as output rises due to factors like economies of scale and diminishing returns.
Answer
The law of variable proportions causes the marginal cost curve to be U-shaped.
The marginal cost curve is U-shaped because of the law of variable proportions. It initially decreases due to increasing returns, reaches a minimum point, and then increases as diminishing returns set in.
Answer for screen readers
The marginal cost curve is U-shaped because of the law of variable proportions. It initially decreases due to increasing returns, reaches a minimum point, and then increases as diminishing returns set in.
More Information
The U-shape of the marginal cost curve illustrates the economic reality of adding increasing amounts of one input while holding others fixed, initially leading to greater efficiencies and lower costs before inefficiencies and higher costs occur.
Tips
Common mistakes include confusing the marginal cost curve with the average cost curves or misinterpreting the initial decrease as irrelevant to the overall shape of the curve.
Sources
- Why is the MC curve U-shaped in the short run? - byjus.com
- Why is the short run marginal cost curve 'U' shaped? - byjus.com
- Why is the MC curve U shaped? - homework.study.com
