passwella.
Menu

WAEC Economics 2009 Question 25

Question 25

Theory of Costs and Revenue

What accounts for the 'U-shape' of the short run average cost (AC) curve?

  1. A.The law of variable proportions
  2. B.Increasing returns to scale
  3. C.Decreasing use of inputs
  4. D.Changing output during the production period.
Show the answer and explanation

Answer: A (The law of variable proportions)

Explanation

Short-run AC first falls and then rises because of first increasing then diminishing returns to the variable factor.