The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-If marginal product increases with an increase in the variable input, the marginal cost must also increase as more units of the input are hired.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-If marginal product increases with an increase in the variable input, the marginal cost must also increase as more units of the input are hired.

Quizplus · Accepted Answer

If marginal product increases with an increase in the variable input, it means that the firm is experiencing increasing returns to scale. In this case, the marginal cost will decrease as more units of the input are hired. Therefore, the statement is false.

The Figure Given Below Shows Three Short Run Average Total