The short-run average cost curve is
A) U-shaped
B) W-shaped
C) S-shaped

Question

Quizplus · Accepted Answer

The short-run average cost curve is typically U-shaped because in the short run, there are both fixed and variable costs involved in producing output. Initially, as output increases, the fixed costs are spread over a greater number of units, leading to a decrease in average cost. However, as output continues to increase, the marginal costs of producing additional units eventually start to outweigh the benefits of spreading fixed costs, leading to an increase in average cost. This pattern creates the U-shape of the short-run average cost curve.

The Short-Run Average Cost Curve Is