What is the correct answer?


MC curve is:

A. L-shaped

B. U-shaped

C. V-shaped

D. Both a and b depending on situation

Correct Answer :

D. Both a and b depending on situation

Marginal cost is relatively high at small quantities of output, then as production increases it declines due to economies of scale and reaches a minimum value, then starts rising due to diseconomies of scale. Thus MC curve forms the shape of V and in some cases forms the shape of U. This shape of MC curve is directly attributable to increasing marginal returns and then decreasing marginal returns.}

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