Total average cost can be represented on a graph by ________.
A) a straight line that rises from left to right
B) a straight line that falls from left to right
C) a u-shaped curve that has a minimum point
D) a u-shaped curve that has a maximum point

Question

Quizplus · Accepted Answer

Total average cost (TAC) is the cost per unit of output, and it includes fixed and variable costs. At low levels of output, TAC is high because the fixed costs are spread over fewer units. As output increases, fixed costs are spread over more units, resulting in a decrease in TAC. However, as output continues to increase, variable costs may increase and begin to outweigh the benefits of spreading fixed costs over more units, causing TAC to increase again. This results in a u-shaped curve with a minimum point, making option C the best choice.

Total Average Cost Can Be Represented on a Graph by ________