For a ﬁrm that faces diminishing returns, the short-run marginal cost curve is _____.

Question

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In the short run, due to diminishing returns, as a firm increases production, it initially experiences decreasing costs due to increased efficiency. However, after a certain point, costs begin to rise due to the inefficiencies of over-utilizing fixed inputs. This results in a U-shaped marginal cost curve, where costs decrease initially but then increase as output continues to grow.

For a ﬁRm That Faces Diminishing Returns, the Short-Run Marginal