The U shape of MC curve reflects
A)economies of scale
B)law of increasing returns
C)reserve capacity
D)law of variable proportion

Question

Quizplus · Accepted Answer

The U shape of the Marginal Cost (MC) curve reflects the law of variable proportions, which states that as more units of a variable input (like labor) are added to fixed inputs (like machinery), the additional output from each new unit of input will eventually decrease. This results in the MC initially decreasing due to increased efficiency (economies of scale) and then increasing as the input becomes less productive.

The U Shape of MC Curve Reflects