ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The short-run cost curves eventually slope upward because of the effects of the diminishing marginal product. The diminishing marginal product means that using an additional input will cause an increase in the output.

Detailed explanation-2: -The short-run marginal cost curve eventually increases because of the law of diminishing return. After a point, the production of a firm starts to rise at a decreasing rate, in the short run. This is when the diminishing returns set in. As production rises at a decreasing rate, total costs rise at an increasing rate.

Detailed explanation-3: -Diminishing marginal returns is an effect of increasing input in the short run after an optimal capacity has been reached. At the same time, at least one production variable is kept constant, such as labor or capital. The law states that this increase in the input will result in smaller increases in output.

Detailed explanation-4: -When marginal product is decreasing, marginal cost is increasing. Since the marginal cost curve, above the minimum average variable cost, is the firm supply curve, when the law of diminishing marginal returns is in effect, the firm’s supply curve will be upward sloping.

Detailed explanation-5: -Diminishing marginal productivity: if more units of a variable input are used in combination with fixed inputs, the rate of increase in total output will eventually decrease. A manager cannot add increasing amounts of variable input to fixed inputs during a production period without eventually decreasing output.