The U-Shaped Average Total Cost Curve Is

question 152

Multiple Choice

The U-shaped average total cost curve is

• A) a result of firms' wanting to find the output level where cost is at its minimum.
• B) unrealistic because average total cost always increases as output increases.
• C) the result of average fixed cost falling and decreasing marginal returns as output increases.
• D) a result of constant marginal returns.
• E) a result of increasing marginal returns.

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Definitions:

Marginal Product

Marginal Product is the additional output resulting from the use of one more unit of a production input, holding all other inputs constant.

Units of Output

The quantities of a good or service produced by a firm or economy.

Diminishing Returns

is an economic principle stating that if one input in the production of a commodity is increased while other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Labor Input

A measure of the amount of labor used in the production process, typically quantified in labor hours.