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Question:

Increasing and decreasing marginal returns to labor most likely explain the U‐shape of the:

A Short-run marginal cost curve.
explanation

• Changes in marginal returns to a variable factor of production are the reason behind the U‐shape of the marginal cost curve and SR average cost curve.
• The U‐shape of the long-run average cost curve is explained by economies and diseconomies of scale.
• The total product curve is not U‐shaped. It initially increases at an increasing rate and then only increases at a decreasing rate.

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