Explanation : A short-run marginal cost curve graphically represents the relation between marginal [i.e. incremental) cost incurred by a firm in the short-run production of a good or service and the quantity of output produced. It is usually U-shaped.
This U shape is directly attributable to increasing, then decreasing marginal returns (and the law of diminishing marginal returns). As marginal product (and marginal returns) increases for relatively small output quantities, marginal cost declines. Then as marginal product (and marginal returns) decreases with the law of diminishing marginal returns for relatively large output quantities, marginal cost increases. ....Read more