Why is the marginal cost curve shaped the way it is?

First of all let’s define Marginal Cost:-It is the cost to a firm to produce one additional unit of output e.g. the cost of Volkswagen to produce an extra carInitially due to the law of increasing marginal returns (extra unit of input produces a more than proportional amount of output) the MC curve dips. However, due to the constraints of a fixed factor input, such as land, additional inputs produce a less than proportional amount of output (decreasing marginal returns) the cost of producing one additional unit rises and hence then MC curve rises.

Answered by Morgan H. Economics tutor

6955 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain why the growth in the demand for freight transport has been roughly the same as that of GDP.


A product with perfectly elastic supply has sales of 100 units per week at a price of £2 per unit. Price elasticity of demand is(-)1 .5 over the relevant range. The government imposes a tax 20%. What will be the government’s weekly tax revenue?


Using Angola as an example, evaluate the view that MNCs play a positive role in the development of LEDCs. (25 marks)


Why can firms in a perfectly competitive market only achieve normal profits in the long run?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo
Cookie Preferences