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

Question

Quizplus · Accepted Answer

Short-run cost curves eventually become upward-sloping because of the law of diminishing marginal returns. As the quantity of the variable input (e.g., labor) is increased while the quantity of the fixed input (e.g., capital) is held constant, the marginal product eventually declines. This means that each additional unit of the variable input adds fewer units to total output than the previous unit. As a result, the total cost of production increases at an increasing rate, resulting in an upward-sloping short-run cost curve. The other options are not the primary reasons for the upward slope of the short-run cost curve.

Short- Run Cost Curves Are Eventually Upward- Sloping Because of the Effects