A U-shaped average total cost curve implies
A)First diminishing returns,and then increasing returns.
B)First marginal cost below average total cost,and then marginal cost above average total cost.
C)That total costs are at a minimum at the minimum of the average cost curve.
D)A linear total cost curve.

Question

Quizplus · Accepted Answer

The U-shape of the average total cost curve implies that initially, as production increases, average total costs decrease, reaching a minimum point where marginal cost equals average total cost. Beyond this point, as production continues to increase, average total costs begin to rise, indicating that marginal cost is above average total cost. This reflects the law of diminishing returns, where initially, adding more of a variable input to a fixed input increases total output at an increasing rate, but after a certain point, it increases output at a decreasing rate.

A U-Shaped Average Total Cost Curve Implies