Which of the following explains why marginal cost rises cont
Which of the following explains why marginal cost rises continually after passing a low level of output?
The marginal product of a variable factor eventually declines as more of the variable factor is combined with other fixed resources.
The marginal rate of income substitution rises after output reaches a low level of output.
The effect of alternating indifference curves eventually overpowers the effect of falling marginal productivity.
The diminishing rate of marginal input quickly reaches zero and thereafter begins to rise continually throughout all subsequent levels of production
| A. | The marginal product of a variable factor eventually declines as more of the variable factor is combined with other fixed resources. | |
| B. | The marginal rate of income substitution rises after output reaches a low level of output. | |
| C. | The effect of alternating indifference curves eventually overpowers the effect of falling marginal productivity. | |
| D. | The diminishing rate of marginal input quickly reaches zero and thereafter begins to rise continually throughout all subsequent levels of production |
Solution
Correct option (A).
With increase in variable factor, its MP declines and so, MC rises.
