### a) U-shaped Average Cost Curve in the Short-Run
The U-shaped Average Cost (AC) curve in the short-run can be attributed to the effects of **fixed costs**, **variable costs**, and **economies and diseconomies of scale**.
- **Initial Decline**: As a firm increases production, the average cost initially decreases due to the spreading of fixed costs over a larger number of units (economies of scale). This results in lower average costs per


