U-Shaped Average Cost Curve

U-Shaped Average Cost Curve

A model of how the average cost for producing a unit changes over time. The average cost per unit begins high and drops as production increases. Eventually, the cost begins to rise again as marginal costs increase. It is so called because, when plotted on a chart, the cost curve looks like the letter U.
References in periodicals archive ?
In the absence of external economies, the equilibrium firm's output and size would be fixed, the firm always operating at the lowest point of its U-shaped average cost curve.
Each seller has a U-shaped average cost curve with minimum at Q*.