Why is the shape of the firm's ATC curve U-shaped?
As the firm increases production

Question

Why is the shape of the firm's  ATC  curve U-shaped? 
 As the firm increases production

Answer

initially fixed costs decrease, but eventually they increase.

Answer

labour productivity increases as more labour is hired.

Answer

total fixed cost is spread over larger outputs, but eventually increasing returns set in.

Answer

total fixed cost is spread over larger outputs and eventually diminishing returns set in.

Answer

initially marginal cost decreases to its minimum and then increasing returns set in.

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