The typical cost curves are U-shaped due to the
A) law of diminishing marginal utility.
B) law of supply.
C) law of demand.
D) law of diminishing marginal product.

Question

Quizplus · Accepted Answer

The U-shape of typical cost curves is due to the law of diminishing marginal product, which states that each additional unit of input will eventually result in a smaller increase in output. This causes costs to first decrease as output increases (due to economies of scale), but then increase at a greater rate as output continues to increase (due to diseconomies of scale). The other laws listed (diminishing marginal utility, supply, and demand) do not directly relate to the shape of cost curves.

The Typical Cost Curves Are U-Shaped Due to the