The short-run average variable cost curve eventually begins to increase at an increasing rate because of
A) diseconomies of scale.
B) a constraint that does not allow the firm to change its production technology.
C) diminishing returns phenomena.
D) increasing returns to scale to capital.

Question

Quizplus · Accepted Answer

The short-run average variable cost curve eventually begins to increase at an increasing rate due to the diminishing returns phenomena. In the short run, at least one factor of production is fixed, and as more units of the variable inputs are added, the additional output from each new unit of input decreases, leading to higher average variable costs.

The Short-Run Average Variable Cost Curve Eventually Begins to Increase