Average total cost rises then falls due to cost structures

Steps:

• Compute ATC at 10 units: (300 + 80) / 10 = 38.
• Compute ATC at 20 units: (300 + 1500) / 20 = 90.
• Compute ATC at 30 units: (300 + 1500) / 30 = 60.
• Observe pattern: ATC increases from 38 to 90, then decreases to 60.

Why D is correct:

• ATC rises then falls, as fixed costs spread less efficiently initially while variable costs surge disproportionately before stabilizing, per the formula ATC = (TFC + TVC) / Q.

Why the others are wrong:

• A: ATC does not fall continuously (rises from 10 to 20 units).
• B: ATC does not fall then rise (rises first from 10 to 20 units).
• C: ATC does not rise continuously (falls from 20 to 30 units).

Final answer: D