econ?

2007-11-08 9:07 am
Average
Total Cost
($)
--
90
65
63.33
60
62
65
68.57
72.5

Explain why the average total cost curve for short-run period of production is
U-shaped?

回答 (2)

2007-11-08 10:21 am
✔ 最佳答案
As there is at least one factor of production is fixed in short run, the average fixed cost is very high because only few units of products are produced by the fixed factors.

When the quantity of products increase, the average fixed cost will decrease because more products are produced by the same fixed factors.

However, when too more products are produced and over the maximum productivity of the fixed factors, the quantity of products will decrease eventually, this is the effect of the Law of Dimishing Marginal Return. Therefore as the products are getting less and meanwhile at least one factor of production is fixed in short run, the average fixed cost increase.

That is why the average total cost for short run is U-shaped.
參考: 自己
2007-11-08 9:17 am
DMRS diminishing returns of marginal substitiution


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