Luke Spacewalker realizes that his space taxi service is operating in the region of diminishing marginal product. As he provides more taxi service in the short run, what will happen to the marginal cost of providing the additional service?
A) Marginal cost will increase.
B) Marginal cost will be zero.
C) Marginal cost will stay the same.
D) Marginal cost will decrease.

Question

Quizplus · Accepted Answer

When operating in the region of diminishing marginal product, the marginal cost of each additional unit produced will increase. This means that in the short run, Luke's space taxi service will require more resources (such as fuel, time, and maintenance) to produce the same amount of output as before. As a result, the cost of producing each additional unit of his taxi service will increase, leading to a higher marginal cost.

Luke Spacewalker Realizes That His Space Taxi Service Is Operating