moving ________ along the marginal cost curve, the ________. This is a topic that many people are looking for. unusual-travel-destinations.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, unusual-travel-destinations.com would like to introduce to you The Shape of the Marginal Cost Curve . Following along are instructions in the video below:
“Everyone welcome to this video on the shape of the short round marginal cost curve curve in this video. I m going to explain why we often depict the marginal curve for the firm looking like a rounded tick shape. Like this one here. So let s start from the basics our marginal cost.
Curve is drawn with quantity on the horizontal axis and a measurement of costs on the vertical axis. A marginal cost curve. Then as we trace its shape from the left to the right tracks the cost of each additional unit as we are increasing how many units that the firm is producing. We can see them that initially when the firm starts producing and the quantity that the firm produces is quite low our marginal costs are initially decreasing meaning.
That each additional unit is cheaper to produce than the last after some point. Though we see that the marginal cost of each additional unit starts to become higher or more expensive than the last. This is when the marginal cost curve starts to increase and have this section that is positively sloped. Here.
The idea that the firm is in the short run is important here recall that firms in the short run can use a number of different types of inputs in which they can make their produce let s call those inputs capital and labor k and l..
So that a firm s output. Q. The quantity that they are producing is a function or dependent on the level of capital k. And labor l.
So you re not worried. This notation. Here. Is just called functional notation.
All this means is exactly how i said. It that the quantity produced by the firm is some function of or dependent on the level of capital and the level of labor. The important thing is that in the short run our capital is fixed so if firm wants to increase its output once you increase its q. It can only change its level of labor.
This is important if we want to produce more we can only increase the amount of labor that we re using we can t change our capital..
So let s say initially that we re producing q. One level of a product and we increase 2q two level of production. The marginal cost here as you can see is lower for these lady units. We can see this quite clearly from the graph remember to increase from q1 to q2 we could only use more labor because our capital is fixed.
So. The question is how is adding more labor. Helping the firm to become more cost efficient here. Well.
The idea is that at least initially the additional labor units allow the firm to become more efficient because we ve more labour. Our current labor is able to specialise in those tasks in which they have the comparative advantage. The initial decline in the marginal cost. Then can be explained through understanding that initially as we add more labour units in order to get more quantity as a firm.
We become more efficient as the labourer is able to move towards the areas of specialization this increase in efficiency means that it is cheaper to produce each successive unit our marginal cost decreases of course..
Though eventually because of our capacity constraint because our capital is fixed. It actually after some point gets very hard to increase our production when we re only just adding labor. So let s say i wanted to increase my level of production again to a level like q3 well to get this additional quantity. I can only add labor.
But because all of the capital is now being used up our labor has to perhaps wait to use the machinery this itself takes time which is expensive alternatively. My labor might be trying to do the jobs that some of the machinery is the better better equipped to do this again is more expensive. So because of the capacity constraint from the fixed level of capital each additional unit becomes more and more expensive to produce the marginal cost of each unit increases. It is the effect of the capacity constraint then because of our short run conditions that explains the upward sloping portion of our marginal cost curve the last interesting relationship to take note of here is that the tick shape of the marginal cost curve looks like a mirror image of the marginal product of labor curve.
The marginal product curve tracks how productive each additional unit of labour. Is and the reasons. Why the marginal product of labor curve has the shape that it has is exactly the same as the reasons. Why the marginal cost curve has the shape that it has as you can see here we have an initial section.
Where the marginal product is increasing and then a larger section..
Where it s decreasing. The initial increase is due to the specialization that we discussed before initially as we at labour. We enable our labor units to move towards those tasks in which they have a specialization or comparative advantage. So we have an increasing marginal product of labor.
This corresponds perfectly to a decreasing marginal cost as our labor units are becoming more effective leading to us being able to produce each additional unit more cheaply after some point. However we see diminishing marginal product of labor. As the capacity constraint kicks in which prohibits how productive each additional unit of labor can be this again corresponds to our increasing marginal cost that we saw before because we can only add labor to get more quantity and that labor is becoming increasingly less productive it becomes more expensive to produce each additional quantity okay that s it that s the explanation of the take shape marginal costs that we often see when we re thinking about the theory of the firm. I hope that this video helps you understand why the shape is like this if it did please like and subscribe you can also check out my other videos on my channel and leave me a comment below i hope you guys are really enjoying studying economics have a lovely day or night ” .
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Hi Guys! In this video I explain why our (Short run) Marginal Cost curve is often represented as looking like a rounded tick shape.
Please like and Subscribe – and comment below.
I hope the video helps!
Microeconomics, Marginal Cost, MC, MC Curve, Marginal Cost Shape