Final answer:
Variable costs increase for each additional unit of output as diminishing returns are encountered. This increase correlates with diminishing marginal productivity observed when each additional input contributes less to total output, as illustrated by the example of adding more barbers to a barbershop.
Step-by-step explanation:
Later in a production cycle, as diminishing returns are encountered, variable costs increase for each additional unit of output. This phenomenon is tied to the concept of diminishing marginal productivity, which is an important aspect of production in the short run. As production increases, total and variable costs tend to rise; however, the rate of increase in variable costs changes over time.
Initially, variable costs may rise at a decreasing rate. But with further production, and as additional inputs (like labor) are added, variable costs begin to increase at an increasing rate due to the diminishing marginal returns of these additional inputs. For example, when we look at a scenario where barbers are hired, we see that the first barber greatly increases output, but subsequent barbers contribute less to output.
As the number of barbers goes from zero to one, there's a significant gain in output. But as more barbers are added, the additional output (marginal product) gained from each new barber diminishes. This diminishing marginal product necessitates the higher variable costs for producing each subsequent unit of output.