Question

27. Average cost curves (except for average fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape

Answer 1

Step-by-step explanation:

The economic theory that focuses on the average and marginal cost explains that, the average and marginal cost curves have the same general shape because,

The average cost curve depends directly on the marginal cost curve, since rising marginal costs must necessarily increase average costs, and falling marginal cost will also decrease average cost but the average cost will never enter the negative region.

Answer 2

Explanation: Both the marginal cost curve and the average variable cost curve are U-shaped. For many firms, this is true because their production exhibits increasing returns at low levels of output and decreasing returns at high levels of output. At the minimum of average cost, the marginal cost curve intersects the average cost curve. This is because when marginal cost is above average cost, average cost is decreasing and when marginal cost is below average cost, average cost is decreasing.