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Production And Costs
Question
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Why is the short run marginal cost curve ‘U’-shaped?

Answer

It is due to operation of law of variable proportion according to which MP first rises, reaches its maximum and then declines. Since increasing returns means diminishing cost and diminishing returns imply increasing cost, therefore, MC first falls because of increasing returns, reaches its minimum and then rises due to operation of diminishing returns. As a result MC curve becomes U-shaped.

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Some More Questions From Production And Costs Chapter

What effect does an increase in excise tax have on supply curve of product?

If a farmer grows rice and wheat, how will an increase in price of wheat affect supply curve of rice?

What is meant by market period?

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What is the shape of supply curve during very short (market period)?

What is the shape of supply curve during short or long period?

What is the price elasticity associated with a straight line supply curve passing through the origin?

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Give two examples where technological progress leads to a shift in the supply curve.

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