Why Does Marginal Cost Eventually Increase As Total Product Increases?


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Marginal cost is basically a function of production. It is the additional cost that has to be borne in order to make an additional unit of production. Now if the production capacity of a plant is 200 units and the total production has increased and is now 250 units, the marginal cost will increase. This is because for making 50 additional units, the plant will have to run for more time, there will be more utility bills, rent etc. That is why the marginal costs increase with the increase in total product cost. However, it is true for cases where the capacity limit has been crossed. Within capacity the marginal cost will be still lower.

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