When the short-run marginal cost curve is upward-sloping,
A)The average total cost curve is upward-sloping.
B)The average total cost curve is above the marginal cost curve.
C)Diminishing returns occurs with greater output.

Question

Quizplus · Accepted Answer

An upward-sloping short-run marginal cost curve indicates diminishing returns to variable inputs. This means that additional units of output require more and more additional inputs, causing the marginal cost of each unit to rise. This leads to higher average variable costs and ultimately higher average total costs. Therefore, choice A is not correct. In the short run, the average total cost curve lies above the average variable cost curve, but it can be above or below the marginal cost curve since the distance between these curves depends on the size of fixed costs. Therefore, choice B is not necessarily true.

When the Short-Run Marginal Cost Curve Is Upward-Sloping