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This affects the cost structure of the firm as well. According to this theory, the marginal cost ( MC), the additional cost of producing each new unit of product, increases with each additional product. This may sound like doomsday for large companies as they face this impediment in their efforts to make more profit. However, this is only true when one views a company in the short-term production run. In the short-term the capital investment in the company is unchanging. However, in the long run, companies can change their entire production capabilities. They can purchase new land or upgrade technology, enabling a shift in their entire production curve as it becomes more efficient in its production methods...
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