Typically, what is the shape of the average total cost curve for a firm in the short run?
A) An average total cost curve is U-shaped.
B) An average total cost curve slopes downward as output expands and approaches the X-axis when output is very large.
C) An average total cost curve constantly slopes upward as output expands and eventually approaches an infinite dollar amount at high rates of output.
D) An average total cost curve is a vertical line.

Question

Quizplus · Accepted Answer

The typical shape of an average total cost curve for a firm in the short run is U-shaped because initially, as output expands, the firm benefits from economies of scale and experiences decreasing average total costs. However, as output increases beyond a certain point, the firm experiences diseconomies of scale, which leads to increasing average total costs. Therefore, the curve initially slopes downward and then starts sloping upward, creating a U-shape.

Typically, What Is the Shape of the Average Total Cost