An economist observed that,as more computers are added to a factory,the costs of production initially decline,reach a minimum,and then rise.In a diagram that has costs on the vertical axis and the number of computers on the horizontal axis,the relationship always is
A)negative and then positive after the minimum point.
B)negative both before and after the minimum point.
C)negative and then linear after the minimum point.
D)linear and then positive after the minimum point.
E)positive and then negative after the minimum point.

Question

Quizplus · Accepted Answer

This describes the typical relationship known as the U-shaped average total cost curve. Initially, as more inputs (in this case, computers) are added, total costs decline due to increased efficiency. However, at some point, further additions will result in diminishing returns, causing costs to increase. The point where costs are at a minimum is known as the optimal level of input.

An Economist Observed That,as More Computers Are Added to a Factory,the