Pollutants harm people and the resources they value. The marginal cost curve for a pollutant shows the additional cost imposed by each unit of the pollutant. When read from left to right, the curve measures the marginal cost of additional units of emissions MCE.
The average variable cost AVC curve will go down but will not be as steep as the marginal costand then go up.
This will not go up as fast as the marginal cost curve. The average fixed cost AFC curve will decline as additional units are produced, and continue to decline. The average total cost ATC curve initially will decline as fixed costs are spread over a larger number of units, but will go up as marginal costs increase due to the law of diminishing returns.
The graph below illustrates the shapes of these curves. Cost Curves Diminishing Returns and Diminishing Marginal Product of Capital The law of diminishing returns states that as one type of production input is added, with all other types of input remaining the same, at some point production will increase at a diminishing rate.
There may be levels of input where increasing inputs causes production to go up at an increasing rate. However, according to the law of diminishing returns, at some point production will go up at a decreasing rate.
The marginal product of capital is the increase in total output associated with an increase in capital, while holding the quantity of labor constant. Capital is also subject to the law of diminishing returns. Economies of Scale Economies of scale mean that goods can be produced at a lower cost per good, as the quantity produced increases.
Large-scale factory operations can permit the most efficient specialization of machinery and labor. Average fixed costs will decline as costs such as advertising can be spread across more and more units.
Diseconomies of Scale Diseconomies of scale occur when per unit costs go up as output is increased. A typical reason given is bureaucratic inefficiencies - more attention may be given to administrative rules as opposed to innovation.
Worker motivation is also more difficult as the number of employees increases. When economies of scale occur, the long-run average total cost LRAC curve will be declining; with diseconomies of scale, the LRAC curve will be rising. Long Run Average Total Curve.This kink in the demand curve leads to a discontinuity in the marginal revenue curve, so only large changes in marginal cost lead to changes in price.
A major limitation is that the kinked-demand model does not explain how the starting price is. The average variable cost (AVC) curve will go down (but will not be as steep as the marginal cost), and then go up.
This will not go up as fast as the marginal cost curve. intersection of the firm’s marginal cost and the market demand curve). As usual, the monopoly determines its optimal output on the basis of MR = MC.
Here, however, it .  Iso-elastic demand curve, e is numerical value of price elasticity of demand where b = a 1/e. If e.
The marginal cost curve is thus her supply curve at all prices greater than $ Figure Marginal Cost and Supply The supply curve for a firm is that portion of its MC curve that lies above the AVC curve, shown in Panel (a). In this case, the intersection of the marginal social cost curve and the demand curve occurs at point S (thin blue lines), with price Ps and output Os.
Point S denotes the socially efficient rate of production.