Marginal cost curves universally exhibit a U-shape due to diminishing marginal returns
Although traditional economic theory posits a universal U-shaped cost curve driven by diminishing returns, empirical and theoretical investigations reveal that cost and return relationships frequently follow more complex trajectories, such as S-curves or linear patterns depending on scale and context.
The claim asserts that marginal cost curves universally exhibit a U-shape due to diminishing returns. While standard economic theory and some empirical findings (such as Paper 0) support U-shaped cost structures, other advanced economic and organizational models (Papers 2 and 10) demonstrate that relationships can be S-shaped or non-universal. Therefore, the claim of a universal U-shape is contested by evidence of alternative nonlinear trajectories.
Marginal cost curves often exhibit a U-shape in traditional economic theory and certain contexts, though empirical studies show they can also follow S-curves or linear patterns.
L. Guinness, L. Kumaranayake, K. Hanson. A cost function for HIV prevention services: is there a 'u' – shape?. 2007. https://doi.org/10.1186/1478-7547-5-13
Paper 0 finds empirical evidence of U-shaped average cost curves in HIV prevention programs as scale increases.
Ilro Lee, J. Cogin. Formalizing the HRM and firm performance link: the S-curve hypothesis. 2020. https://doi.org/10.1080/09585192.2020.1746682
Paper 2 demonstrates that the relationship between investment and performance is nonlinear in the shape of an S-curve rather than a simple U-shape.
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Stephen K. Layson. The increasing returns to scale <scp>CES</scp> production function and the law of diminishing marginal returns. 2015. https://doi.org/10.4284/0038-4038-2013.202
Paper 3 examines production functions and notes that while diminishing returns typically apply, certain conditions can violate standard assumptions.
Lyu S, Yan F. The nonlinear relationship between urban design form and energy efficiency.. 2026. https://doi.org/10.1038/s41598-026-41779-7
Paper 10 finds that urban form and energy efficiency follow a distinct S-shaped trajectory with varying marginal returns rather than a universal U-shape.
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