The marginal cost rises when the law of diminishing returns sets in because as more and more variable inputs are added to the production process, the marginal product of each additional input becomes smaller and smaller. This leads to an increase in the marginal cost of each additional unit of output produced.

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The Marginal Cost

Question 96

Multiple Choice

The marginal cost:

A) always rises in the short run.
B) always falls in the long run.
C) rises when the law of diminishing returns is being experienced.
D) falls when the law of diminishing returns is being experienced.

Correct Answer: