What can the manager infer about the relationship between the square of the level of output and the average costs?
A)As the level of output increases,average costs decrease at an increasing rate.
B)As the level of output increases,at first average costs decrease,then will start to increase.
C)As the level of output increases,at first average costs increase,then will start to decrease.
D)As the level of output increases,average costs increase at an increasing rate.

Question

Quizplus · Accepted Answer

Typically in the short-run, average costs decrease as output increases due to economies of scale. However, as output continues to increase, diseconomies of scale can arise and average costs may start to increase. The square of the level of output implies a non-linear relationship, and therefore, option B is the best choice.

What Can the Manager Infer About the Relationship Between the Square