Why TVC increases at decreasing rate at initial stages of production.

1.	Why TVC increases at decreasing rate at initial stages of production.
Answer» In the initial stages of production, a firm may be enjoying increasing returns to a factor (because of underutilisation of the fixed factor). It is a situation when MP (of the variable factor) tends to rise. Cost is just the opposite of productivity. Rising MP means falling cost. When the cost of producing an additional unit is falling, TVC should be increasing only at the decreasing rate.<br>In the initial stages of production, a firm may be enjoying increasing returns to a factor (because of underutilisation of the fixed factor). It is a situation when MP (of the variable factor) tends to rise. Cost is just the opposite of productivity. Rising MP means falling cost. When the cost of producing an additional unit is falling, TVC should be increasing only at the decreasing rate.

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