Why is the average cost curve "U" shaped?
1 Answer
Dec 29, 2015
The average cost curve is composed of different costs. Thus, the total “average” cost curve starts at a high point, decreases to some minimum point and then increases again.
Explanation:
Some costs are greatest early in the lifecycle, but decrease over time. Others are minimal early in the lifecycle, but increase with time. Thus, the total “average” cost curve starts at a high point, decreases to some minimum point and then increases again.
