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WHAT?: One of three basic questions of allocation (the other two are How? and For Whom?). Answering the 'What?' question of allocation determines the types and quantities of goods and services produced with society's limited resources. Should society produce hammocks or hot fudge sundaes? Computers or Cadillacs? Birdfeed or battleships? The production possibilities analysis sets the stage for answering the 'What?' question.
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                           MARGINAL COST CURVE: A curve that graphically represents the relation between the marginal cost incurred by a firm in the short-run product of a good or service and the quantity of output produced. This curve is constructed to capture the relation between marginal cost and the level of output, holding other variables like technology and resource prices constant. Three related curves are average total cost curve, average variable cost curve, and average fixed cost curve. The marginal cost curve, the graphical relation between marginal cost and output, is U-shaped. Marginal cost is relatively high at small quantities of output, then as production increases, it declines, reaches a minimum value, then rises once again.This U shape is directly attributable to increasing, then decreasing marginal returns (and the law of diminishing marginal returns). As marginal product (and marginal returns) increases for relatively small output quantities, marginal cost declines. Then as marginal product (and marginal returns) decreases with the law of diminishing marginal returns for relatively large output quantities, marginal cost increases. | Marginal Cost Curve |  |
The graph presented at the right is the marginal cost curve for the short-run production of Wacky Willy Stuffed Amigos (those cute and cuddly scorpions and turtles). The quantity of Stuffed Amigos production, measured on the horizontal axis, ranges from 0 to 10 and the marginal cost incurred in the production of Stuffed Amigos, measured on the vertical axis, starts at $5, declines to $1.50, then rises again to $12.The marginal cost curve is U-shaped. For the first 4 Stuffed Amigos, marginal cost declines from $5 to a low of $1.50. However, for the production beyond 6 Stuffed Amigos, marginal cost increases. The source of this U-shaped marginal cost curve rests with increasing and decreasing marginal returns. In fact, the negatively-sloping portion of the marginal cost curve coincides exactly with increasing marginal returns in production Stage I. The positively-sloping portion of the marginal cost curve coincides exactly with decreasing marginal returns in production Stage II. The marginal cost curve takes center stage in the analysis of a firm's short-run production. In particular, a profit-maximizing firm equates the marginal revenue received from selling a good with the marginal cost of producing it. For a firm operating under perfect competition, its marginal cost curve becomes its supply curve. The marginal cost curve, because it measures the incremental opportunity cost of producing one more unit of a good plays, an important role in analyzing the efficient allocation of resources.
Recommended Citation:MARGINAL COST CURVE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2020. [Accessed: February 22, 2020].
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WHITE GULLIBON
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Today, you are likely to spend a great deal of time browsing about a thrift store hoping to buy either decorative celebrity figurines or a flower arrangement with anything but tulips for your grandfather. Be on the lookout for strangers with large satchels of used undergarments.
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On a typical day, the United States Mint produces over $1 million worth of dimes.
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"Be willing to have it so. Acceptance of what has happened is the first step to overcoming the consequences of any misfortune." -- William James, Psychologist
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CPS
Current Population Survey (US)
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