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What Is U-shaped Cost Curves And Diminishing Returns?

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What Is U-shaped Cost Curves And Diminishing Returns?

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U shaped cost curve demonstrate that initially when firm start business with fix capital its cost of production is very high in early stages of production due to less labor applied with fixed capital, because sufficient amount of capital is available for production but optimal labor is not applied with fixed capital so the firm desired output level of production can not be achieved, if firm not apply more labor with such fixed capital its target can not be achieved. So cost of production is very high in early stages of production. In early sages of production the marginal productivity of capital is positive and this indicate that if firm apply more labor with fixed capital the output per unit of labor increases and the firm gain more out put and its revenue increases. If firm will apply more labor with fixed capital, its total product and total revenue increases. In such production span the marginal productivity of capital and labor both increases with decreasing rate, the fact behind

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