Why AU curve is "U" shaped …
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Posted by Priyanshu . 5 years, 9 months ago
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Yogita Ingle 5 years, 9 months ago
The nature 'U' shaped short-run Average Cost curve can be attributed to the law of variable proportions. ... Thus, the Average Costs of the firms continue to fall as output increases because it operates under the increasing returns due to various internal economies.
It's a U-shaped curve. Initially, the variable cost per unit of output decreases as output increases. ... After the low, the variable cost per unit of output starts to increase. The increase in AVC after a certain point is indirectly related to the law of diminishing marginal returns
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