Figure 7.7.1
-A cubic cost function implies:
A) a U-shaped average variable cost curve.
B) a U-shaped marginal cost curve.
C) a U-shaped average cost curve.
D) all of the above

Question

Figure 7.7.1
-A cubic cost function implies:
A) a U-shaped average variable cost curve. 
B) a U-shaped marginal cost curve. 
C) a U-shaped average cost curve. 
D) all of the above

Quizplus · Accepted Answer

A cubic cost function is one where the total cost is a function of the cube of the quantity produced. This implies that marginal cost is upward sloping, which creates a U-shaped average variable cost curve. Additionally, as marginal cost intersects average total cost at the minimum point of the average cost curve, the average cost curve also takes on a U-shape. Therefore, all three curves (marginal cost, average variable cost, and average total cost) have a U-shape.

Figure 7.7.1 -A Cubic Cost Function Implies