Which of the following explains why the marginal cost curve has a U shape?
A)Initially, the marginal product of labor falls, then rises.
B)Initially, the average product of labor rises, then falls.
C)Initially, the marginal product of labor rises, then falls.
D)Initially, the average cost of production rises, then falls.

Question

Quizplus · Accepted Answer

The marginal cost curve has a U shape because initially, the marginal product of labor rises as more workers are added, but eventually, diminishing returns set in and the marginal product of labor falls. This leads to a increase in marginal cost. Eventually, as more workers are added, productivity begins to increase again due to economies of scale, leading to a decrease in marginal cost. Thus, the marginal cost curve has a U shape.

Which of the Following Explains Why the Marginal Cost Curve