The average cost curve of regular products is U-shaped and has an optimal lowest point,but with digital products the average cost per unit declines as quantity increases.

Question

Quizplus · Accepted Answer

The statement is true. The U-shaped curve of the average cost is due to economies of scale in the production process for regular products, where the cost per unit initially decreases with increased output until it reaches an optimal minimum point, after which it starts increasing again. However, digital products have low production costs, and the cost per unit decreases as quantity increases due to the absence of physical production costs. Therefore, the average cost curve for digital products is downward sloping rather than U-shaped.

The Average Cost Curve of Regular Products Is U-Shaped and Has