A firm's short-run cost curves,as conventionally drawn,show that
A)AFC increases as output increases.
B)ATC = TFC + TVC.
C)AVC decreases as long as MC AVC.
D)the MC curve intersects the AVC and ATC curves at their maximum points.
E)ATC decreases and then increases as output increases.

Question

A firm's short-run cost curves,as conventionally drawn,show that
A)AFC increases as output increases.
B)ATC = TFC + TVC.
C)AVC decreases as long as MC > AVC.
D)the MC curve intersects the AVC and ATC curves at their maximum points.
E)ATC decreases and then increases as output increases.

Quizplus · Accepted Answer

The conventional shape of the short-run cost curves shows that as output increases, the average total cost (ATC) initially decreases due to spreading fixed costs over a larger output. However, as output continues to increase, the ATC eventually increases due to diminishing marginal returns to variable inputs. Therefore, choice E is the correct option. The other options are incorrect as AFC may decrease as output increases, ATC is the sum of TFC and TVC not equal to them, AVC may initially decrease but will eventually increase as output continues to increase, and the intersection of MC, AVC, and ATC curves will occur at their minimum points, not maximum points.

A Firm's Short-Run Cost Curves,as Conventionally Drawn,show That