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Bob Edwards owns a pastry shop. Bob hires an economist who assesses the shape of the pastry shop's average total cost (ATC) curve as a function of...

Bob Edwards owns a pastry shop. Bob hires an economist who assesses the shape of the pastry shop's average total cost (ATC) curve as a function of the number of bagels produced. The results indicate a U-shaped average total cost curve. Bob's economist explains that ATC is U-shaped for two reasons. The first is the existence of diminishing marginal product, which causes it to rise. What would be the second reason? Assume that the marginal cost curve is linear. (Hint: The second reason relates to average fixed cost)

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The second reason is that... View the full answer

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