If marginal costs increase as output increases, then the average fixed cost curve will be U-shaped.

Question

Quizplus · Accepted Answer

The statement relates to marginal costs and average fixed cost, which are two different concepts. The shape of the average fixed cost curve depends on the relationship between total fixed cost and quantity produced, not on the marginal cost curve. The average fixed cost curve is typically downward-sloping at low levels of output and then flattens out as output increases, resulting in a "L-shaped" curve.

If Marginal Costs Increase as Output Increases, Then the Average