If a firm's cost functions fit the standard stylization, as its output increases its marginal and average costs:
A)decrease, then are constant, then increase.
B)are constant, then increase, then decrease.
C)increase, then decrease, then are constant.
D)increase, then are constant, then decrease.

Question

Quizplus · Accepted Answer

In the standard stylization of a firm's cost functions, as output increases, both marginal and average costs typically decrease at first due to economies of scale, then remain constant as the firm reaches its most efficient level of production, and finally increase due to diseconomies of scale.

If a Firm's Cost Functions Fit the Standard Stylization, as Its