The short-run average total cost curve is U-shaped because

A) average fixed costs decline continuously as output increases.
B) of increasing and diminishing returns.
C) of economies and diseconomies of scale.
D) minimum efficient scale is encountered.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, leading to cost per unit of output decrease with increasing scale.

Average Fixed Costs

The constant expenses in production, which remain unchanged regardless of output levels, when divided by the volume of output created.

U-shaped

A description often used in economics to describe the graphical representation of a situation where certain costs initially decrease, reach a minimum, and then start to increase as output expands.