The Typical Average Cost Curve in a Competitive Market Is

question 17

Multiple Choice

The typical average cost curve in a competitive market is:

• A) an upward-sloping straight line because fixed costs are constant, and variable costs are increasing with the level of output.
• B) U-shaped because the firm's fixed costs are first spread over greater quantities, but then increasingly greater quantities will create production capacity constraints.
• C) downward-sloping until fixed costs are eliminated and then it becomes a horizontal line.
• D) U-shaped because increasing quantities of output cause a decrease in fixed costs but an offsetting increase in variable costs.

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