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Cost curves
The document discusses various cost curves, including the average cost (AC), average variable cost (AVC), and marginal cost (MC) curves, highlighting their shapes and relationships. AC and AVC are 'U' shaped, with AC starting to rise after reaching its minimum point, which coincides with MC at this point. Additionally, it notes that while AVC is positively sloped and can never touch AC, MC intersects both curves at their minimums and rises and falls at different rates.
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Cost curves
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- 24. RELATIONSHIP BETWEEN ALLCOST CURVES.
- 25. • AVERAGE COSTCURVE • AC curve starts falling when reaches its minimum and then starts rising. • At minimum point of AC curve, it is equal to MC. • AC curve is ‘U’ shape because of LAW OF VARIABLE PROPORTION.
- 26. • AVERAGE VARIABLECOST • AVC curve is positively sloped. • AVC curve is ‘U’ shaped. • AVC curve can never touch AC, because of AFC curve. • AVC curve falls for small time because of LAW OF VARIABLE PROPORTION.
- 27. • MARGINAL COST •MC curve is positively sloped and ‘’U” shaped. • MC curve always cuts AVC and AC curve at their minimum and then moves ahead. • When AC curve and MC curve both rise, MC curve rises faster • But when they fall, MC falls faster. • Minimum point of AC curve is on the right side of minimum point of AVC curve.