The short-run average total cost curve is U-shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect, while at high output levels the reverse is true.False

Question

Quizplus · Accepted Answer

The statement is true. At low output levels, the spreading effect of falling average fixed costs dominates, leading to a decline in average total cost. At high output levels, the diminishing returns effect dominates, leading to an increase in average total cost.

The Short-Run Average Total Cost Curve Is U-Shaped Because at Low