Bob Edwards owns Bob's Bagels.He hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced.The results indicate a U-shaped average total cost curve.Bob's economist explains that the ATC curve is U-shaped for two reasons, the first being the existence of diminishing marginal product, which causes it to rise.What would the second reason be? Assume that the marginal cost curve is linear.(Hint: The second reason relates to average fixed cost.)

Question

Quizplus · Accepted Answer

The Answer of Bob Edwards owns Bob's Bagels.He hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced.The results indicate a U-shaped average total cost curve.Bob's economist explains that the ATC curve is U-shaped for two reasons, the first being the existence of diminishing marginal product, which causes it to rise.What would the second reason be? Assume that the marginal cost curve is linear.(Hint: The second reason relates to average fixed cost.)

Bob Edwards Owns Bob's Bagels