Marginal Cost Marginal cost: xincrease in total cost from producing one more unit of output(theadditional cost of inputs required to produce each successive unit of output)xonly reflects changes in variable costsofixed cost does not increase as output increasesomarginal cost is the slope of both total cost and variable costShape of the Marginal Cost Curve In the short run, the firm is constrained by a fixed input, therefore: 1. the firm faces diminishing returns to variable inputs and 2. the firm has limited capacity to produce output As the firm approaches that capacity it becomes increasingly costly to produce successively higher levels of output. Marginal costs ultimately
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