Marginal costs curves first start to fall before they rise. This is due to the fact that while at first an increase in marginal product may see a decrease in marginal cost, eventually a firm will experience diminishing marginal product which happens when marginal cost rises with each marginal product.
Simply put: when there's too many cooks in the kitchen it starts to be more expensive to bake an additional cake.
Depending on the size of the company, with the first few hires it may reduce marginal cost while increasing marginal product because a team may be more efficient than just one worker. Eventually the company will see diminishing marginal product for reasons such as the workspace getting increasingly crowded, having to hire more management to oversee the increasing amount of employees, etc.
Marginal cost is important when deciding to increase of decrease production because profit-maximizing firms strive to operate at a point where marginal revenue equals marginal cost. If marginal revenue is less than marginal cost, a firm can boost profit by increasing production - and vice versa.
There are many ways I could apply these cost concepts to my life. The first that comes to mind would be finding the point of benefit maximization between work and school. There are x amount of hours I need to work to be able to eat, pay bills, support my kids (dogs), etc. Over the past couple of semesters I have had to find the balance of classes to be able to utilitze my time as efficiently as possible while not overwhelming myself and being able to achieve the high standards I've set for myself in terms of grades and GPA. The first semester I only took two classes. I can now relate that to having marginal revenue greater than marginal cost. I realized that if I was diligent, I could squeeze another class in. Now if I were to take four classes, I think that would equate to marginal cost being higher than marginal revenue. My grades would likely suffer at the hand of just not having enough time to fulfill all of the homework assignments and study like I should. It seems that for now, I have found the point - at three classes - where my marginal "revenue" equals my marginal cost. I have found the current point where I can make enough to provide a living, earn the grades I want, and get done with my degree as quickly and efficiently as possible.
And that's all for now...
Ciao!
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