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The marginal cost first decreases and then increases because of the law of diminishing returns. Initially, as more units are produced, the cost per unit decreases due to economies of scale. However, after a certain point, additional units may require more resources or become less efficient, causing the cost per unit to increase.

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What is maginal cost?

Marginal cost is the increase or decrease in the total cost of a production run for making one additional unit of an item.


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