What is the shape of average cost curve? Provide the reason for that particular shape.
What will be an ideal response?
Average cost curve is roughly “U” shaped.
It has two reasons. Average cost includes average fixed costs and average variable costs. The first reason pertains to the fixed cost as fixed costs are divided over more products when production expands average cost falls. The second reason relates to changing input proportions. As the firm increases the quantity of one input while keeping other inputs constant, the law of diminishing marginal returns tells us that MPP will first rise. As a result, average costs will decrease. Average cost will increase when the size of the firm increases.
You might also like to view...
Enacting a law controlling rents near a major university will increase the affordable housing for college students.
Answer the following statement true (T) or false (F)
A technological advance ________ aggregate supply, shifting the aggregate supply curve ________ and potentially bringing the ________ phase of the business cycle
A) decreases; rightward; expansion B) decreases; leftward recession C) increases; rightward; expansion D) increases; rightward; recession E) increases; leftward; expansion
A successful market economy requires
A) an equitable distribution of income and limits on immigration. B) generous unemployment benefits and paid medical leave for everyone in the labor force. C) a government-controlled banking system and government price controls. D) well-defined property rights and an independent court system to adjudicate disputes based on the law.
What are some of the specific policies aimed at improving the productivity of women farmers in Kenya?
What will be an ideal response?