The long-run average cost curve is usually U-shaped because of

the law of variable proportionsCorrect answerYour answerincreasing and then decreasing returns to scaleCorrect answerYour answerfixed costsCorrect answerYour answerchanges in demandCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

In the long run all inputs vary, so the shape comes from returns to scale, not from a fixed input.
Increasing returns lower average cost as the firm grows; decreasing returns raise it later.

Worth noting

The law of variable proportions explains the short-run curves, where one input is fixed.

Concept: Shape of long-run AC
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe shapes of the cost curves

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The long-run average cost curve is usually U-shaped because of

Explanation