Question

With the expansion of output, the shot-run average cost curve, beyond a point, starts rising because ___________.

• A. average fixed cost increases sharply
• B. more production yields lower per unit price
• C. the law of variable proportions applies to short-run production
• D. sales expense becomes much larger

Answer 1

Answer: (C)

the law of variable proportions applies to short-run production

With the expansion of output, the short-run average cost curve, beyond a point, starts rising because the law of variable proportion applies to short-run production, implying diminishing returns from variable factors.