(i) Because of law of variable proportion : In the beginning, with increase in output, AC falls because of the operation of the law of increasing returns. After reaching the minimum point, when we increase the output, AC starts increasing due to the operation of diminishing returns.
(ii) Indivisibilities of the factor: In the short run when a firm increases the output, due to indivisibilities of some fixed factors of production, AC curve falls in the beginning. After the optimum point, AC increases. Thus AC curve gets U-shape.
