In simple words variable proportion law tells us that when we use any variable resource with other fixed resource, production will change in three stages, first total production will increase, it will decrease the marginal cost, then total production will unchanged and marginal cost will reach on bottom point, after this total production will started to decrease because, we can not use of variable factors as the substitute of fixed resources all time, after effective use of fixed resources, it needs more because of increasing production but non availability of fixed resources, marginal cost will increase and after this we can see the u shape of marginal cost curve. Marginal cost curve is u shaped due to applying the law of variable proportion. įixed factors of production are indivisible and from this quality of fixed factors gets some internal economies and it decreases the marginal cost which is calculated total cost but total cost’s main part is fixed cost and its indivisibility surely effects marginal cost curve after some time due to increasing internal diseconomies, fixed cost started to increase and with this effect marginal cost curve turns upward. With fast decreasing the value of average fixed cost, the value of marginal cost also decreases and marginal cost curve becomes negative, after some time fixed and average fixed costs leave this trend to reducing, and its direct effect will on shown on marginal cost curve’s direct, it turns upward with increasing marginal cost. One by one we are explaining all causes with simple way in following manners.Īverage fixed cost curve effects marginal cost curve. There are many reasons beyond making marginal cost curve U Shaped.
0 kommentar(er)
