What is the shape of the short run marginal cost curve ?

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UPSC Combined Section Officer – 2024

The short-run marginal cost (MC) curve is typically U-shaped. Initially, as output increases, marginal cost falls due to increasing marginal returns from the variable input (e.g., labor). However, as output continues to increase, the firm encounters diminishing marginal returns to the variable input (due to fixed factors like capital), causing marginal cost to rise. This initial fall followed by a rise gives the MC curve its U-shape.

– Marginal Cost (MC) is the cost of producing one additional unit of output.
– Short-run costs are affected by fixed and variable factors.
– The U-shape is a result of the Law of Variable Proportions (or Diminishing Marginal Returns).

The short-run average variable cost (AVC) and average total cost (ATC) curves are also typically U-shaped. The MC curve intersects both the AVC and ATC curves at their minimum points.

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