Answer:
The correct answer is option b.
Explanation:
The increase in output level in the short run leads to an increase in the marginal cost of production. This is because of diminishing marginal returns.
The law of diminishing returns states that as more and more inputs are hired in the production process, the marginal return from each input goes on declining. In other words, when we increase inputs after a certain point the output starts increasing at a declining rate.
The fixed cost is constant throughout the production process, and with an increase in the output, the average fixed cost goes on declining.
