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Overtime Wages and Increasing Marginal Cost
A car manufacturer operating with a fixed amount of equipment illustrates how marginal costs can rise in the short run. To increase production beyond its normal capacity, the company may need to schedule overtime shifts for its assembly line workers. Since employees are typically paid a higher rate for overtime hours, the labor cost for each additional car produced during these shifts increases, thereby raising the marginal cost of production.
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Introduction to Microeconomics Course
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Learn After
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