The law of diminishing returns causes the shape of the average-total-cost curve to be
A) hump-shaped.
B) U-shaped.
C) bell-shaped.
D) a circle.
E) a straight line.

Question

Quizplus · Accepted Answer

The law of diminishing returns causes the average-total-cost curve to initially decrease as production increases (due to economies of scale), but eventually reach a minimum and then increase (due to diseconomies of scale). This results in a U-shaped curve.

The Law of Diminishing Returns Causes the Shape of the Average-Total-Cost