Question

The shapes of which cost curves can be attributed to the law of diminishing marginal product (or returns)?

1) Average Variable Cost (AVC) curve
2) Average Fixed Cost (AFC) curve
3) Average Total Cost (ATC) curve
4) Marginal Cost (MC) curve

Answer 1

The shapes of the AVC, ATC, and MC curves can be attributed to the law of diminishing marginal product or returns.

Step-by-step explanation:

The shapes of the following cost curves can be attributed to the law of diminishing marginal product or returns:

1. Average Variable Cost (AVC) curve: The AVC curve is U-shaped and decreases initially due to diminishing marginal product, but eventually starts increasing as more units of output are produced.
2. Average Total Cost (ATC) curve: The ATC curve is also U-shaped and follows a similar pattern as the AVC curve.
3. Marginal Cost (MC) curve: The MC curve is upward-sloping, indicating an increase in production costs as more units of output are produced.

The Average Fixed Cost (AFC) curve, on the other hand, is not influenced by the law of diminishing marginal product or returns as it represents the fixed costs that remain constant regardless of the level of output.