Increasing Marginal Costs
Supply
AO2·HL
Syllabus requirement
Explains why the supply curve slopes upward due to rising costs of production at higher output levels.
Assessment objectives
AO2 Application and Analysis
Higher LevelThis topic is assessed at HL.
Summary
This topic explains how marginal cost—the cost of producing one more unit—typically rises as output increases because of diminishing marginal returns. That rising marginal cost is the reason the supply curve slopes upward: firms will only supply extra output if the price covers the higher marginal cost, and they reduce output when price falls below marginal cost.
