Final answer:
The statement is true, as both long-run and short-run average total cost curves can be U-shaped due to economies and diseconomies of scale. The average cost decreases with increased output due to fixed cost spreading and then increases at large scales due to management and operational inefficiencies.
Step-by-step explanation:
True or false: Long-run average total cost curves are often U-shaped for the same reasons that average total cost curves are often U-shaped. This statement is true. Both long-run average total cost curves and short-run average total cost curves can exhibit a U-shaped pattern for similar reasons related to economies of scale and potential diseconomies of scale.
In the short run, average total cost curves are U-shaped due to the presence of fixed costs and the changing costs associated with variable inputs. As production increases initially, the average total costs decrease due to the spreading of fixed costs over a larger output (also known as economies of scale).
However, after a certain point, the cost advantages of scale are outweighed by the inefficiencies that arise from managing a larger operation, leading to an increase in the average total cost, demonstrating diseconomies of scale.
As for the long-run average total cost curve, all factors of production are variable, and it also reflects a U-shaped pattern for similar reasons. Initially, as scale increases, average costs decrease due to the realization of economies of scale.
However, beyond a certain point, further increases in scale may lead to diseconomies of scale, where per unit costs start to rise again. These economies and diseconomies of scale in the long run can result from factors such as changes in managerial efficiency, input costs, and technological changes.