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Why is the marginal cost curve U-shaped?

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The marginal cost curve is U-shaped because of the relationship between short-run marginal production and cost and long-run marginal production and cost.

An inverse correlation exists between short-run increase in marginal units produced and short-run decrease in marginal fixed cost per unit. In marginal cost analysis—which is the cost to produce one extra unit of a good or service—marginal fixed costs for short-run production, which include labor, land and machinery, decrease per unit as marginal units produced increase. The correlation is inverse (cost goes down while units produced go up) and shows up graphically as a downward slope, indicating economies of scale in which profit is being maximized.

A direct correlation exists between long-run increase in marginal units produced and long-run increase in marginal fixed cost per unit (i.e., marginal means per...

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