In the short run, if the average cost curve is shown as decreasing, it is because
A)fixed cost is spread out over larger amounts of production.
B)it becomes cheaper to produce an infinite amount of goods.
C)additional units of production are inferior.
D)variable costs increase with each additional amount of production.

Question

Quizplus · Accepted Answer

The spread of fixed cost over larger amounts of production leads to a decrease in average cost in the short run. This is because fixed costs are fixed in the short run, meaning they do not change with the level of output. Therefore, as output increases, fixed costs are spread over a larger number of units, resulting in a decrease in average cost.

In the Short Run, If the Average Cost Curve Is