A cubic cost function implies:
A) linear average fixed cost curve.
B) linear marginal cost curve.
C) a U-shaped average cost curve.
D) all of the above

Question

Quizplus · Accepted Answer

A cubic cost function is one where the total cost equation is a cubic function of output. This means that the marginal cost curve is quadratic (the derivative of a cubic function) and the average cost curve is U-shaped (the ratio of a cubic function to output). Therefore, the correct choice is C, a U-shaped average cost curve. The other choices are incorrect.

A Cubic Cost Function Implies