The average cost curve has a U shape because the _____ dominates at low levels of quantity, and the _____ dominates at high levels of quantity.
A)diminishing marginal product; spread effect
B)spread effect; diminishing marginal product
C)comparative advantage; absolute advantage
D)absolute advantage; comparative advantage

Question

Quizplus · Accepted Answer

The U shape of the average cost curve is due to the spread effect dominating at low levels of quantity (as fixed costs are spread over fewer units) and diminishing marginal product dominating at high levels of quantity (as each additional unit produced requires more and more inputs, leading to higher costs). Therefore, choice B is the correct answer.

The Average Cost Curve Has a U Shape Because the _____