The typical shape of the long-run average cost curve is like _____

Economics Dec 07, 2020

The typical shape of the long-run average cost curve is like _____.

a. a circle

b. the letter "U"

c. an inverse of the letter "V"

d. the letter "C"

Expert Solution

The correct option is (b). The letter "U".

The long-run average cost curve usually gives the resemblance of letter alphabet U. Thus, it depicts the average total cost will fall initially and after reaching a certain minimum level it will start to rise. Initially, the average cost declines as the fixed cost spread over more and more units. But, after reaching the minimum level, it rises because the fixed cost has been covered.

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