As output increases, marginal cost will eventually
A) decrease because of the law of diminishing returns.
B) increase because of the law of increasing returns.
C) increase because of the law of diminishing returns.
D) decrease because of the law of increasing returns.

Question

Quizplus · Accepted Answer

Marginal cost will eventually increase because of the law of diminishing returns. This economic principle states that as the quantity of a factor of production increases, holding all other inputs constant, the additional output (marginal product) generated by additional units of that input will eventually decrease. This leads to an increase in the cost of producing each additional unit, or marginal cost.

As Output Increases, Marginal Cost Will Eventually