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WAEC Economics 1998 Question 14

Question 14

Theory of Costs and Revenue

The shape of the average cost (AC) curve shows that as production increases

  1. A.total cost decreases
  2. B.average cost decreases and then increases
  3. C.average cost increases
  4. D.marginal cost steadily increases
  5. E.total cost remains constant
Show the answer and explanation

Answer: B (average cost decreases and then increases)

Explanation

The AC curve is U-shaped: it falls at first and then rises as output increases.