Final answer:
The law of diminishing marginal product affects the Marginal Cost (MC), Average Variable Cost (AVC), and Average Total Cost (ATC) curves, reflecting how increased inputs lead to smaller incremental gains in output and thus higher costs per unit in the short run.
Step-by-step explanation:
The law of diminishing marginal product affects several cost curves in the short run. Specifically, it influences the shapes of the Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC) curves. As the amount of a variable input increases, while other inputs remain constant, the additional output produced by each extra unit of the variable input eventually decreases. This effect can be seen in:
- Marginal cost curves: Initially decrease due to increasing marginal returns but eventually increase as diminishing marginal returns set in.
- Average variable cost curves: Tend to follow a similar pattern to marginal costs in the short run, decreasing before increasing as the cost of additional production gets higher due to diminishing marginal returns.
- Average total cost curves: They are influenced by both variable and fixed costs, and as such, they also show a downward and then upward slope influenced by diminishing marginal returns to the variable input.
Average fixed cost curves are not directly affected by the law of diminishing marginal product since fixed costs do not change with the level of output in the short run.