Which of the following statements about the average total cost curve is false?
A)It is initially downward sloping because increases in quantity make the average fixed cost smaller.
B)It eventually becomes upward sloping because the law of diminishing returns sets in.
C)It is always downward sloping because the average fixed costs will always decrease as quantity increases.
D)The marginal cost curve crosses the average total cost curve at the point at which average total cost is minimized.

Question

Quizplus · Accepted Answer

The statement that the average total cost curve is always downward sloping because the average fixed costs will always decrease as quantity increases is false. While average fixed costs may decrease as quantity increases, the average variable cost may increase, resulting in an upward sloping average total cost curve.

Which of the Following Statements About the Average Total Cost