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Why is the marginal cost curve in the short-run u-shaped?

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Michael Koren eNotes educator | Certified Educator

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The marginal cost curve shows the relationship between the marginal cost of a product and a level of output for that product. When production of a product is in its beginning stage, the marginal cost tends to be relatively high. As production levels increase, the marginal cost declines and then eventually rises again.

The curve has a “u” shape because when marginal cost drops at the beginning of production, marginal returns increase. However, as more of an item is produced, eventually the law of diminishing returns sets in, leading to an increase of marginal cost.

Analyzing the marginal cost curve is crucial to a firm at the beginning of production. The marginal cost curve impacts how a firm will allocate its resources in the production of its products.

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Tim Mbiti eNotes educator | Certified Educator

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Marginal cost is the cost incurred when making an extra unit and it is also affected by the principle of variable proportions. Marginal cost is derived solely from variable costs and follows a similar U-shape. The marginal cost...

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