Asked by Jatesha Peters on Jul 02, 2024
Verified
Average variable cost and average total costs get closer together as output increases because
A) diminishing returns set in.
B) average fixed costs decrease as output increases.
C) marginal costs decrease as output increases.
D) economies of scale become apparent.
Diminishing Returns
A 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.
Economies of Scale
The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out.
- Understand the distinction between fixed costs and variable costs and their behaviour in production.
Verified Answer
Learning Objectives
- Understand the distinction between fixed costs and variable costs and their behaviour in production.
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