The law of diminishing marginal returns causes a firm's short-run marginal cost curve to be U-shaped.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns states that as a firm keeps adding more and more variable inputs to the fixed inputs, the marginal product of each additional unit of variable input will eventually decline. This results in an increase in marginal cost in the short run, causing the short-run marginal cost curve to be U-shaped. Therefore, the statement is true.

The Law of Diminishing Marginal Returns Causes a Firm's Short-Run