Why is the MC curve U-shaped?
Understand the Problem
The question is asking about the shape of the Marginal Cost (MC) curve, specifically why it appears in a U shape. The U shape indicates that costs decrease with increased production up to a certain point, after which they begin to rise again due to diminishing returns. This question pertains to concepts in economics and cost analysis.
Answer
Law of diminishing returns
The marginal cost curve is U-shaped in the short run due to the law of variable proportions, also known as the law of diminishing returns. Initially, marginal costs decrease due to increasing returns; however, they rise after a certain point due to decreasing returns.
Answer for screen readers
The marginal cost curve is U-shaped in the short run due to the law of variable proportions, also known as the law of diminishing returns. Initially, marginal costs decrease due to increasing returns; however, they rise after a certain point due to decreasing returns.
More Information
The U-shape of the marginal cost curve reflects the efficiency changes during production. Initially, as production increases, resources are used more efficiently, reducing marginal costs. After optimal efficiency is reached, additional production becomes less efficient due to factors like overutilization of inputs, leading to rising marginal costs.
Tips
A common mistake is confusing marginal cost with average cost. Remember, the marginal cost specifically refers to the cost of producing one more unit of output.
Sources
- Why is the short run marginal cost curve 'U' shaped? - BYJU'S - byjus.com
- Why is the MC (marginal cost) curve U-shaped? - homework.study.com
- Why MC Curve Is U-shaped | Marginal Cost - krayonnz.com
