A Level Economics AQA Practice Exam 2025 - Free Economics Practice Questions and Study Guide

Question: 1 / 400

What is the shape of the average cost curve?

Linear

U-shaped

The average cost curve is U-shaped due to the nature of how average costs behave as output levels change. At lower levels of production, average costs tend to be high because fixed costs are spread over a small number of units. As production increases, the average cost decreases due to economies of scale, where efficiencies are gained in production processes.

However, beyond a certain point, average costs start to increase again due to diseconomies of scale, where factors such as managerial inefficiencies or resource constraints come into play. This leads to the typical U-shape of the average cost curve, illustrating the relationship between output and average cost effectively. This shape is crucial for firms in determining the optimal level of production that minimizes average costs.

Get further explanation with Examzify DeepDiveBeta

L-shaped

Flat

Next Question

Report this question

Download A Level Economics AQA Practice Exam 2025 - Free Economics Practice Questions and Study Guide PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy