Question

As the quantity of input increases, in the beginning what change takes place in the short run marginal cost curve?

• A. Increases
• B. Declines
• C. Remains constant
• D. None of these

Hint:

In the short run, the marginal cost curve typically declines initially due to increasing returns to the variable factor.

Answer 1

The Correct Option is B

Step 1: Understanding marginal cost.
In the short run, as more units of an input are used, the marginal cost (the additional cost of producing one more unit) initially declines. This is due to increasing returns to the variable factor, where increasing production leads to better utilization of inputs. However, after a certain point, diminishing returns set in, causing marginal cost to rise.

Step 2: Analyzing the options.
(A) Increases: Incorrect. At first, the marginal cost tends to decline, not increase.
(B) Declines: Correct. Initially, marginal cost declines as output increases due to increasing returns.
(C) Remains constant: Incorrect. Marginal cost does not remain constant in the short run; it typically changes.
(D) None of these: Incorrect, as the correct answer is (B).

Step 3: Conclusion.
In the beginning, as the quantity of input increases, the marginal cost curve initially declines.