Question

why does MC decrease when TVC increase at an decreasing rate?​

Answer 1

Explanation:

In the initial stages of production, a firm may be enjoying increasing returns to a factor (because of underutilisation of the fixed factor). It is a situation when MP (of the variable factor) tends to rise. Cost is just the opposite of productivity. Rising MP means falling cost. When the cost of producing an additional unit is falling, TVC should be increasing only at the decreasing rate.

Answer 2

Explanation:

This is because, in the initial stages of production, there is scope for efficient utilization of fixed factor by using more of the variable factor . Hence, as the variable input employed increases, the productive efficiency of variable inputs ensures that the TVC increases but at a diminishing rate