When a monopolist faces a U-shaped average cost curve in the short run,we know that as more and more output is produced,the
A) law of diminishing marginal returns eventually overrules the decrease in average fixed cost.
B) decrease in average fixed cost eventually overrules the law of diminishing marginal returns.
C) decrease in average fixed cost always overrules the law of diminishing marginal returns.
D) law of diminishing marginal returns always overrules the decrease in average fixed cost.
E) law of diminishing marginal returns coincides with the decrease in average fixed cost.

Question

Quizplus · Accepted Answer

In the short run, as output increases, average fixed costs decrease, but eventually, the law of diminishing marginal returns causes marginal costs to rise, leading to an increase in average costs.

When a Monopolist Faces a U-Shaped Average Cost Curve in the Short