Short-run cost curves for a firm are eventually upward-sloping because of the effects of
A)the increasing price of variable inputs.
B)diminishing marginal product.
C)increasing fixed costs.
D)increasing marginal productivity of the variable inputs.
E)decreasing total product.

Question

Quizplus · Accepted Answer

Short-run cost curves are eventually upward-sloping because of the law of diminishing marginal product, which states that as a firm increases the quantity of a variable input (such as labor), holding all other inputs constant, the marginal product of that input eventually decreases. This leads to increasing marginal cost and upward-sloping short-run cost curves. The other choices are not necessarily true for all firms or situations.

Short-Run Cost Curves for a Firm Are Eventually Upward-Sloping Because