Question

‘There is an inverse relationship between cost curves and product curves.’ Explain.

Answer 1

The statement “There is an inverse relationship between cost curves and product curves” means that as the productivity of input increases, the cost of producing each additional unit of output decreases, and vice versa. This relationship is especially seen between marginal product (MP) and marginal cost (MC). When marginal product increases due to better efficiency in input use, a firm can produce more output with the same input, which reduces marginal cost. On the other hand, when marginal product decreases — often due to overuse of inputs or diminishing returns — the marginal cost rises because more input is required to produce additional output. Hence, when MP rises, MC falls, and when MP falls, MC rises, establishing an inverse relationship. This connection is based on the law of variable proportions, which explains how output behaves when varying one input while keeping others constant.