Asked by Kirsten Landsverk on Jun 03, 2024
Verified
The short-run average total cost curve eventually begins to increase at an increasing rate because of
A) economies of scale.
B) the constraint that the firm cannot change production technologies.
C) diminishing returns.
D) increasing returns to scale.
Diminishing Returns
A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, will begin to decrease.
Average Total Cost
The total cost of production divided by the quantity of output produced.
Economies of Scale
Enterprises achieve cost benefits from their operation size, resulting in a reduction of cost per output unit as the scale expands.
- Understand the concept of diminishing returns and its impact on cost curves.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
C
Explanation :
The short-run average total cost curve begins to increase at an increasing rate due to diminishing returns, which occur when adding more of one factor of production (e.g., labor) to a fixed amount of another factor (e.g., capital) results in smaller increases in output.
Learning Objectives
- Understand the concept of diminishing returns and its impact on cost curves.