c) Cost curves

b) derivation of short-run cost curves from the assumption of diminishing marginal productivity

ATC and MC

• decrease then increase due to the law of diminishing marginal returns

• initial decrease → specialisation

• eventual increase → overcrowding

LRAC

• decreases then increases due to economies of scale

• initial increase

  • specialisation

  • purchasing economies

  • cost distribution

• eventual decrease

  • communication breakdown

  • low coordination

  • bureaucracy