When a ﬁrm's productivity increases, its short-run average total cost curve _____.

Question

Quizplus · Accepted Answer

When a firm's productivity increases, it means it can produce more output with the same amount of inputs or the same output with fewer inputs. This leads to a decrease in the average total cost of production, causing the short-run average total cost curve to shift downward. This shift reflects the firm's ability to produce goods at a lower cost.

When a ﬁRm's Productivity Increases, Its Short-Run Average Total Cost