Question

Why marginal cost is u-shaped curve?

Answer 1

• The marginal cost curve illustrates the relationship between the marginal cost and the quantity of goods and services produced within a country. This curve is usually U shaped.
• This is because of the following reasons:

1. When the firm is producing smaller inputs, the marginal cost incurred by the firm is initially high.
2. But, when the production increases by a smaller amout, the marginal cost start's to decline until it reaches a minimum value.
3. After reaching this minimum point, when the production is increased further the marginal cost again starts to rise.

Hence this curve shows the increasing and decreasing marginal returns of a firm.

The below diagram illustrates the U shaped Marginal cost curve:-