CFA Practice Question

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CFA Practice Question

Diminishing returns cause which of the following costs to eventually increase?
A. Total cost
B. Average variable cost
C. Average fixed cost

User Contributed Comments 7

User Comment
azramirza Bcuz its a short run concept
jpducros Wouldn't total cost also increase ?
azramirza Will effect ATC and not total cost..
dini85 Fixed cost will eventually reduce when the quantity increases... Variable cost decides the diminishing return..Even when quantity increases after certain level VC will increase thats diminishing return..
GouldenOne I have no clue how returns have anything to do with variable cost
bidisha No clue
Get a clue
I need to too
gill15 To all...this is where you are confused...

Notice the wording -- what will cause it to EVENTUALLY increase

Yes total cost is increasing but it is ALWAYS increasing.

AVC and ATC is decreasing first and then eventually increases due to diminishing marginal returns.
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