The Shape of the Short-Run Average Total Cost Curve Is

question 332

Multiple Choice

The shape of the short-run average total cost curve is a result of

• A) economies of scale.
• B) diseconomies of scale.
• C) the law of diminishing marginal product.
• D) falling profits.

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Definitions:

Variable Costs

Expenses that change in proportion to the level of production or sales volume, such as raw materials or direct labor costs.

Profit

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activities.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.

Unit Variable Cost

The cost associated with producing one additional unit of a product, which includes labor, materials, and other variable expenses.