Marginal cost rises over the range of increasing marginal returns and falls over the range of diminishing marginal returns.

Question

Quizplus · Accepted Answer

Marginal cost rises over the range of diminishing marginal returns and falls over the range of increasing marginal returns. When marginal returns are increasing, the cost of producing additional units decreases because the fixed cost is spread over more units. However, when marginal returns diminish, the marginal cost of producing additional units starts to increase since it requires more input to produce each additional unit.

Marginal Cost Rises Over the Range of Increasing Marginal Returns