from 40 to 60 haircuts, total costs rise by 400 – 320, or 80. Thus, the marginal cost for each of those marginal

20 units will be 80/20, or $4 per haircut. The marginal cost curve is generally upward-sloping, because

diminishing marginal returns implies that additional units are more costly to produce. We can see small range

of increasing marginal returns in the figure as a dip in the marginal cost curve before it starts rising. There is a

point at which marginal and average costs meet, as the following Clear it Up feature discusses.

CLEAR IT UP

Where do marginal and average costs meet?
The marginal cost line intersects the average cost line exactly at the bottom of the average cost curve—which occurs

at a quantity of 72 and cost of $6.60 in Figure 7.8. The reason why the intersection occurs at this point is built into

the economic meaning of marginal and average costs. If the marginal cost of production is below the average cost
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