Detailed reasons

The further reasons for the short run average cost curve being 'U' shaped are as follows:

1.Economies of scale :Alfred Marshal has divided economies of scale into two parts internal economies and external economies.The internal economies arise due to the expansion of the first itself.On the other hand external economies arise to the expansion of the industry as a whole.The internal economies are of following types:

• Technical economies :The technical economies arise from the division of labour and economies in the use of plant and machinery.The division of labour increase efficiency which reduces per unit cost.Similarly,the use of large machinery reduces per unit cost when output is increased.
• Marketing economies :The marketing costs does not very with increase in sales up to certain point.So there is economies is purchase,transport,advertisement when sales increase.
• Managerial economies :The managerial cost decrease as the output increase.This is called managerial economies.A single manager can supervise large production up to certain limit.due to these economies of scale average cost decrease as the output increase.So AC curve is downward sloping in the beginning.This view has been seconded by a most of economists including Chamberlain.

2.Invisibilities :Some of the factors are indivisible such as machinery.The machinery or a manager cannot be cut into half to reduce output.So when the output is increased,these factors are efficiently utilized.This view is held by a host of economies including kanldo,Robinson,Stigler.

3.Law of variable proportions: According to the law of variable proportions if more and more variable factors are used to affixed factor,first the marginal product increases,but after a point,the marginal product declines..In other words,first the cost fall as the output is increased and after point cost increase as the output is increased.In the first stage of production.