A firm's short-run marginal cost curve is decreasing when
A)average fixed cost is increasing.
B)total fixed cost is decreasing.
C)marginal product is decreasing.
D)marginal product is increasing.
E)capacity is reached.

Question

Quizplus · Accepted Answer

When a firm's short-run marginal cost curve is decreasing, it means that the marginal product of labor is increasing. This is because as more units of labor are used, the additional output gained from each additional unit of labor is increasing. Therefore, option D is the correct choice. Options A, B, and E are incorrect as they do not necessarily have any relationship with the shape of the short-run marginal cost curve. Option C is also incorrect as a decreasing marginal product would cause the marginal cost curve to increase.

A Firm's Short-Run Marginal Cost Curve Is Decreasing When