Question

Why is short-term average cost curve U-shaped?

Answer 1

Answer:

In the short-run period,the average cost(AC) curve is U -shaped due to the law of variable proportions. This states that as more and more units of a variable factor are applied to the same fixed factor,initially,the total product would increase but would eventually come down.

Answer 2

The short-term average cost curve U- shaped because of the law of variable proportion.

Explain short- term average cost curve?

• In short term average cost curve, the average curve is equal to the sum of the average fixed curve and average variable curve
• When the output increased then average cost decreased due to the law of variable proportion
• When it reaches the minimum point then average cost increased due to the operation of the law of diminishing returns