As output expands, the slope of the average total cost curve
A)stays negative throughout
B)stays positive throughout
C)is first negative and then positive
D)is first positive and then negative
E)is constant

Question

Quizplus · Accepted Answer

In the short run, the average total cost curve initially decreases due to the spreading of fixed costs over a larger quantity of output, resulting in a negative slope. However, beyond a certain level of output, the marginal cost (the additional cost of producing one more unit of output) increases due to diminishing returns to variable inputs, causing the average total cost to increase, resulting in a positive slope. Hence, the slope of the average total cost curve is first negative and then positive as output expands.

As Output Expands, the Slope of the Average Total Cost