One of the major reasons for the U-shaped average total cost curve is the fact that
A) there are increasing returns from labor regardless of the number of workers employed.
B) there eventually are decreasing returns from labor as more workers are employed.
C) prices fall as output increases.
D) the average fixed cost increases as more output is produced.
E) the variable cost decreases as more output is produced.

Question

Quizplus · Accepted Answer

As more workers are employed, the marginal product of labor eventually decreases and therefore the average total cost increases, resulting in a U-shaped curve. This is due to the phenomenon of diminishing returns to scale.

One of the Major Reasons for the U-Shaped Average Total