This curve (Right) differs from the typical U-shaped marginal cost curve (Left) which has been used in the industrial age era microeconomic modelling. Largely, for companies like GE and Dangote Cement, as output increases, the marginal cost would fall first, but over time it will begin to rise. Because of that eventual increase in the marginal cost, these firms are bounded and constrained on how far they can grow.
That is why GE and Dangote Cement cannot be in every local government in the world because unbounded outputs will harm them as their marginal costs rise (see Left)! If you studied economics in secondary school, the shape you see is actually the shape of Average Fixed Cost which benefits, initially, from the economies of scale before diminishing returns set in.
Digital platforms do not have this limitation as increasing output takes marginal cost to near absolute zero (see Figure 1.3 Right). With that, Facebook can be technically available anywhere, boosting its ability to scale and grow, unbounded and unconstrained.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
As a digital consumer sector entrepreneur, pushing your marginal cost to a good position is a very important strategy.
---
Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.