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Bob Edwards owns Bob's Bagels

Accounting

Bob Edwards owns Bob's Bagels. He hires an economist who assesses the shape of the bagel shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that there are two factors that cause the ATC curve to be U-shaped. One factor is the existence of diminishing marginal product, which causes it to rise.

What is the other factor? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost.)

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