microbook_3e-page106 - Marginal Cost Marginal cost increase...

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Marginal Cost Marginal cost: x increase in total cost from producing one more unit of output (the additional cost of inputs required to produce each successive unit of output) x only reflects changes in variable costs o fixed cost does not increase as output increases o marginal cost is the slope of both total cost and variable cost Shape 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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