The 'U' shape of the short-run average cost curve is due to:

CA Foundation · Business Economics · MTP · January 2026
The 'U' shape of the short-run average cost curve is due to:
(A) A. Fixed inputs
(B) B. Increasing and then diminishing returns
(C) C. Constant returns to scale
(D) D. None of these

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. Increasing and then diminishing returns

Topics: Theory of Production and Cost

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