Why do average variable costs eventually rise if a company's output increases enough?
A)The diminishing marginal revenue triggers increased use of resources.
B)The reduction in average fixed costs must be offset by increasing variable costs.
C)Diminishing marginal product occurs, causing average variable costs to rise.
D)The price paid for each unit of input keeps rising.

Question

Quizplus · Accepted Answer

As a company increases its output, it will eventually experience diminishing marginal product. This means that each additional unit of input will produce less and less additional output. As a result, the average variable cost per unit of output will rise because more and more resources are needed to produce each additional unit of output. This increase in average variable cost is due to the law of diminishing marginal returns, and it is the major reason why average variable costs eventually rise as a company increases its output.

Why Do Average Variable Costs Eventually Rise If a Company's