Why does the short-run average total cost curve eventually turns upward to form a U-shape?
A) because of diminishing marginal productivity
B) because of diminishing marginal cost
C) because of increasing average fixed cost
D) because all factors can be varied in the long run

Question

Quizplus · Accepted Answer

The short-run average total cost curve eventually turns upward to form a U-shape primarily due to diminishing marginal productivity. 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 produced by each new unit of input eventually decreases. This phenomenon, known as diminishing marginal productivity, leads to increasing marginal costs, which in turn causes the average total cost to rise after reaching a certain point of output.

Why Does the Short-Run Average Total Cost Curve Eventually Turns