When the law of diminishing returns begins to operate, the TVC curve begins to fall at an increasing rate rise at a decreasing rate fall at a decreasing rate rise at an increasing rate
Question
When the law of diminishing returns begins to operate, the TVC curve begins to fall at an increasing rate rise at a decreasing rate fall at a decreasing rate rise at an increasing rate
Solution 1
When the law of diminishing returns begins to operate, the Total Variable Cost (TVC) curve begins to rise at an increasing rate.
Here's why:
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The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower incremental per-unit returns.
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When this law starts to operate, each additional unit of input will produce less output than the previous unit.
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This means that to produce the same amount of output, more input is needed which increases the variable cost.
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Therefore, the TVC curve begins to rise.
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And because each additional unit of input is producing less and less output, the rate at which the TVC curve rises will also increase. Hence, the TVC curve begins to rise at an increasing rate.
Solution 2
When the law of diminishing returns begins to operate, the Total Variable Cost (TVC) curve begins to rise at an increasing rate. This is because as more units of a variable input (like labor) are added to a fixed input (like capital), the additional output (marginal product) gained from each extra unit of the variable input will eventually start to decrease. This means that the cost of producing each additional unit of output will start to increase, which in turn causes the TVC curve to rise at an increasing rate.
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