Which of the following best describes why the marginal cost curve slopes upward?

Choose 1 answer:
(A) The income effect overtakes the the substitution effect.
(B) Increasing returns to inputs create increasing costs.
(c) Specialization and the division of labor change the costs a firm faces.
(D) People get less and less additional satisfaction from each unit of consumption.
(E) Production functions with diminishing marginal returns yield upward sloping marginal cost curves.

Question

Which of the following best describes why the marginal cost curve slopes upward?

Choose 1 answer:
(A) The income effect overtakes the the substitution effect.
(B) Increasing returns to inputs create increasing costs.
(c) Specialization and the division of labor change the costs a firm faces.
(D) People get less and less additional satisfaction from each unit of consumption.
(E) Production functions with diminishing marginal returns yield upward sloping marginal cost curves.

Accepted Answer

∻Solution∻ ‖ a ⋮ Marginal Cost Curve: The marginal cost (MC) curve represents the additional cost incurred by producing one more unit of a good or service. ‖ ‖ b ⋮ Diminishing Marginal Returns: In the short run, as more units of a variable input (like labor) are added to a fixed input (like capital), the additional output produced by each additional unit of the variable input eventually decreases. This phenomenon is known as diminishing marginal returns. ‖ ‖ c ⋮ Upward Slope of MC Curve: Due to diminishing marginal returns, the cost of producing each additional unit increases, leading to an upward-sloping marginal cost curve. ‖ ‖ d ⋮ Correct Answer: The correct answer is (E) "Production functions with diminishing marginal returns yield upward sloping marginal cost curves." ‖ ∻Answer∻ ⚹ (E) Production functions with diminishing marginal returns yield upward sloping marginal cost curves. ⚹ ∻Key Concept∻ ⚹ Diminishing Marginal Returns ⚹ ∻Explanation∻ ⚹ The marginal cost curve slopes upward because, in the short run, as more units of a variable input are added to a fixed input, the additional output from each additional unit of input decreases. This results in increasing costs for each additional unit produced, leading to an upward-sloping marginal cost curve. ⚹◊What impact does increasing returns to inputs have on a firm's costs according to microeconomic theory?⍭ Generate me a similar question◊

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