As a firm's production increases in the short run, the average total cost curve eventually slopes upward because
A) marginal physical product eventually declines as output increases.
B) marginal cost eventually declines as output increases.
C) average fixed cost declines with increases in output.
D) average physical product rises with increases in output.

Question

Quizplus · Accepted Answer

As production increases in the short run, eventually the marginal physical product of labor decreases due to the law of diminishing returns. This leads to an increase in the marginal cost of production, which in turn increases the average total cost curve. Therefore, as output increases, the average total cost curve slopes upward.

As a Firm's Production Increases in the Short Run, the Average