- Why is the marginal cost curve shaped the way it is? - Texas Essay Editors | Economics Essays - Texas Essay Editors | Economics Essays

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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.

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