More Realistic Cost CurvesA realistic marginal cost curve has a “swoosh” shape. Starting from a very low output level, marginal cost often falls as the firm increases output. That’s because hiring additional workers allows greater specialization of their tasks and leads to increasing returns. Once specialization is achieved, however, diminishing returns to additional workers set in and marginal cost rises. The corresponding average variable cost curve is now U-shaped, like the average total cost curve.