The average total cost curve indicates that
A) as output rises in the short run, costs decline rapidly.
B) as output rises in the short run, per unit costs initially fall but eventually rise.
C) firms generally operate at a highly inefficient point of production.
D) costs cannot be contained even if businesses employ the proper combination of resources.
E) as more output is produced in the short run, average total costs must increase.

Question

Quizplus · Accepted Answer

The average total cost curve initially slopes downward due to economies of scale but eventually slopes upward due to diseconomies of scale, indicating that per unit costs initially fall but eventually rise as output increases in the short run.

The Average Total Cost Curve Indicates That