Which of the following curves are U-shaped?
i.average variable cost curve
ii.average fixed cost curve
iii.average total cost curve

Question

Quizplus · Accepted Answer

The U-shaped curve represents the average total cost curve (ATC), which is the combination of the average variable cost (AVC) curve and the average fixed cost (AFC) curve. Both AVC and ATC initially decrease as output increases, indicating economies of scale, but eventually, they start increasing due to diseconomies of scale. AFC keeps decreasing with increasing output due to spreading the fixed cost over a greater number of units, but it is always downward sloping and cannot form a U-shape on its own. Therefore, only AVC and ATC are U-shaped.

Which of the Following Curves Are U-Shaped