Explain why average total costs initially decrease and then increase as output increases
What will be an ideal response?
Initially, as output increases, both average fixed cost and average variable cost decrease. So, average total cost decreases at first. But as output increases further, diminishing returns set in and average variable cost begins to increase. Eventually, average variable cost increases more quickly than average fixed cost decreases, so average total cost increases.
You might also like to view...
Throughout the 1980s, the Federal Reserve
a. primarily targeted M1. b. primarily targeted M2. c. returned to targeting the federal funds rate. d. began targeting inflation.
A feature of perfect competition is
A) use of non-price competition by firms. B) mutual interdependence among firms. C) unique products. D) standardized products.
Stock market price quotations are an example of money serving as a
A) store of value. B) medium of exchange. C) unit of accounting. D) economic value.
Most people base their current consumption spending at least partially on
a. short-run debt. b. long-run debt. c. long-run real interest rates. d. long-run income.