The short-run average total cost curve eventually begins to increase at an increasing rate because of
A) economies of scale.
B) the constraint that the firm cannot change production technologies.
C) diminishing returns.
D) increasing returns to scale.

Question

Quizplus · Accepted Answer

The short-run average total cost curve begins to increase at an increasing rate due to diminishing returns, which occur when adding more of one factor of production (e.g., labor) to a fixed amount of another factor (e.g., capital) results in smaller increases in output.

The Short-Run Average Total Cost Curve Eventually Begins to Increase