As the amount of an activity increases, what generally happens to its marginal cost?

Marginal cost refers to the additional cost incurred from producing one more unit of a good or service. As the quantity of an activity increases, marginal cost tends to increase due to the principle of diminishing returns. This principle states that when a company continues to add more of one factor of production while keeping others constant, the additional output produced (marginal return) from the last unit of input will eventually decrease. As resources become limited or less efficient, the cost of producing each additional unit tends to rise.

For example, in a factory, as more workers are employed, initially, production might increase significantly. However, after a certain point, adding more workers may lead to overcrowding or inefficiencies, causing the cost of producing each additional unit to rise. Hence, the relationship between the quantity of an activity and its marginal cost is typically that marginal cost increases with increased activity levels, making this answer appropriate.