Question

The principle of increasing marginal cost implies what?

Answer 1

That there is direct relationship between price and quantity. Marginal cost is the cost of producing an additional unit of a good or service. Generally, marginal cost rises on each successive unit produced. A producer is willing to increase production only if he or she receives a higher price for the additional units produced. If price falls, the cost of producing the good will be more than the price the seller receives, and he or she will cut back production.