The marginal cost curve:
A)Declines initially as output increases and rises with further increases in output
B)Is equal to the average variable cost curve
C)Rises initially as output increases and declines with further increases in output
D)Is always constant

Question

Quizplus · Accepted Answer

The marginal cost curve at first decreases as output increases due to the increasing returns to scale (economies of scale), but then it rises as output continues to increase due to decreasing returns to scale (diseconomies of scale). Therefore, choice A) is the best answer. B) is incorrect because the average variable cost curve includes both variable and fixed costs, which the marginal cost curve only measures the additional cost of producing one more unit. C) is incorrect because it is the opposite of what the marginal cost curve actually represents. D) is incorrect because the marginal cost curve cannot be constant as it reflects changes in costs associated with producing additional units.

The Marginal Cost Curve