What is the shape of the average total cost curve for a firm in the short run?
A) U-shaped.
B) A horizontal line.
C) A vertical line.
D) A curve that slopes upward to the right.

Question

Quizplus · Accepted Answer

In the short run, the average total cost curve for a firm is usually U-shaped. This is because initially, as a firm increases its output, it benefits from economies of scale, which lower its average costs. However, as the firm continues to increase its output beyond a certain point, it starts to experience diseconomies of scale, which increase its average costs. This results in a U-shaped curve for the average total cost.

What Is the Shape of the Average Total Cost Curve