The shape of short-run variable cost curve is determined by
A)the firm's effort to minimize cost
B)the firm's effort to maximize profit
C)competition in the industry
D)the marginal productivity of the variable inputs the firm uses
E)the money the firm spends

Question

Quizplus · Accepted Answer

The shape of short-run variable cost curve is determined by the marginal productivity of the variable inputs the firm uses. As the marginal product of labor or capital increases, the short-run variable cost curve slopes downwards, and as the marginal product of labor or capital decreases, the short-run variable cost curve slopes upwards. Thus, marginal productivity is the key determinant of the shape of the short-run variable cost curve.

The Shape of Short-Run Variable Cost Curve Is Determined by