Short run cost curves (4)
If output is at a quantity of 3000 per day, using the figure below, pick one answer describing how the average cost will change if output is increased to 3001 per day.
The correct answer is b.
If output increases from a quantity of 3000 per day, average cost will fall. This is because at this output the average cost curve is sloping downwards.
Increasing output will reduce the average cost until it reaches a minimum at a quantity of approximately 5000 per day. Then the average cost curve slopes upwards, so average cost increases when output increases beyond 5000 per day.