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NEW QUESTION: 1
An upward-sloping short-run marginal cost curve shows that:
A. with a fixed amount of labor, as more and more capital is added, output increases at a decreasing rate, and thus each unit is more expensive than the previous unit.
B. with a fixed amount of capital, as more and more labor is added, output decreases, and thus marginal cost increases.
C. with a fixed amount of capital, as more and more labor is added, output increases at a decreasing rate, and thus each unit is more expensive than the previous unit.
In the short run, capital is assumed fixed. As more labor is added, output will increase, but due to diminishing returns, it will increase at a decreasing rate. Thus the next worker costs the same amount but adds less to production, increasing the marginal cost of the last unit, and resulting in an upward-sloping marginal cost curve.