Final answer:
Increasing marginal costs imply that marginal output is decreasing, which can be seen in the context of diminishing marginal productivity. Firms must evaluate whether the additional cost of producing more unities is outweighed by the revenue those units generate.
Step-by-step explanation:
When marginal costs increase as output increases, it is a reflection of characteristic a. marginal output is decreasing. This occurrence is due to the economic principle of diminishing marginal productivity, a concept explained with the example of a growing number of barbers generating less additional output per new barber hired. Consequently, while total and variable costs rise with production, the marginal gain from each additional unit of output—or marginal product—tends to decrease beyond a particular point.
Moreover, the calculation of marginal cost is done by dividing the change in total or variable costs by the change in output. Rising marginal costs suggest that each additional unit of output is becoming more expensive to produce, underlining a decreasing marginal output scenario. This dynamic is essential for firms since they should compare rising marginal costs to the additional revenue gained to determine if continued production adds to profit.
Marginal costs increase as output increases. This reflects the characteristic that marginal output is decreasing. When output increases, the additional cost incurred to produce each additional unit is higher than the previous unit. This is due to factors such as diminishing marginal productivity, where the additional output gained from each additional unit of input diminishes.