The Short-Run Average Total Cost Curve Gets Its U-Shape as a Result

question 150

Multiple Choice

The short-run average total cost curve gets its U-shape as a result of

• A)constant returns to scale.
• B)diminishing marginal returns.
• C)economies of scale.
• D)total fixed costs.
• E)diseconomies of scale.

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Definitions:

Total Fixed Cost

Total fixed cost refers to the sum of all costs required to produce any output in which these costs do not change with the level of output.

Total Variable Cost

The total of expenses that vary directly with the volume of production or sales, such as materials and labor.

Average Total Cost

The sum of all production expenses, both fixed and variable, divided by the total quantity of units manufactured.

Average Fixed Cost

The fixed cost per unit produced, calculated by dividing total fixed costs by the number of units produced.