The Short-Run Average Total Cost Curve Is U-Shaped Because at Low

question 295

True/False

The short-run average total cost curve is U-shaped because at low output levels the spreading effect of falling average fixed costs dominates the diminishing returns effect,while at high output levels the reverse is true.

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Definitions:

Consumption Bundle

A combination of goods and services that a consumer chooses to consume at a given time.

Budget Constraint

The limit on the consumption patterns of an individual or household based on their income and the prices of goods and services.

Feasible

Capable of being done or achieved; possible within a set of constraints or conditions.

Gallons of Gasoline

A measurement of gasoline volume, with one gallon equal to approximately 3.785 liters, commonly used in the United States for fuel transactions.