The correct answer is: A. MC curve initially falls and then rises.
The marginal cost (MC) curve is a graph that shows the additional cost incurred by producing one more unit of output. In the short run, the MC curve typically starts off low and then rises as output increases. This is because, in the short run, some costs are fixed, so the only way to produce more output is to use more variable inputs, which have increasing marginal costs.
In the long run, all costs are variable, so the MC curve will be upward-sloping throughout. This is because, as output increases, firms will have to use more and more of all inputs, including inputs that are subject to diminishing returns.
Here is a brief explanation of each option:
- Option A: MC curve initially falls and then rises. This is the correct answer. As output increases, the MC curve typically starts off low and then rises. This is because, in the short run, some costs are fixed, so the only way to produce more output is to use more variable inputs, which have increasing marginal costs.
- Option B: MC initially rises and then falls. This is not the correct answer. In the short run, the MC curve typically starts off low and then rises. It does not initially rise and then fall.
- Option C: MC continuously rises. This is not the correct answer. In the short run, the MC curve typically starts off low and then rises. It does not continuously rise.
- Option D: None of the above. This is not the correct answer. The correct answer is A.