Over the short run, the average cost of a firm's variable factors decreases to a minimum and then increases.

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Quizplus · Accepted Answer

This is because, in the short run, as production increases, firms initially experience increasing returns to the variable factor (e.g., labor), which reduces the average variable cost. However, after reaching a certain point of production, diminishing returns set in, causing the average variable cost to increase.

Over the Short Run, the Average Cost of a Firm's