When a firm produces a small amount of output, the spreading effect:
A) is stronger than the diminishing returns effect.
B) is weaker than the diminishing returns effect.
C) and diminishing returns effect are equal.
D) is zero.

Question

Quizplus · Accepted Answer

When a firm produces a small amount of output, the spreading effect is stronger because fixed costs are spread over a larger number of units, reducing the average total cost significantly.

When a Firm Produces a Small Amount of Output, the Spreading