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Which curve is never U-shaped?
- a)ATC curve
- b)AVC curve
- c)AFC curve
- d)MC curve
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Which curve is never U-shaped?a)ATC curveb)AVC curvec)AFC curved)MC cu...
Explanation:
The U-shaped curve is a characteristic of the average variable cost (AVC) and average total cost (ATC) curves. However, the average fixed cost (AFC) and marginal cost (MC) curves do not exhibit a U-shape.
Average Fixed Cost (AFC) Curve:
The average fixed cost (AFC) curve is a rectangular hyperbola. It slopes downwards to the right but never touches the horizontal axis. This is because fixed costs remain constant, no matter what the level of output is. Therefore, as output increases, the fixed cost per unit decreases. AFC is calculated by dividing the total fixed cost by the level of output.
AFC = Total Fixed Cost / Quantity
As the level of output increases, the denominator increases, and hence the AFC decreases. Since the curve slopes downwards to the right, it never exhibits a U-shape.
Marginal Cost (MC) Curve:
The marginal cost (MC) curve is the slope of the total cost (TC) curve. It shows the additional cost incurred in producing one more unit of output. MC is calculated by dividing the change in total cost by the change in output.
MC = Change in Total Cost / Change in Quantity
The MC curve is U-shaped if the marginal product of labor (MPL) curve is diminishing. This is because the additional output produced by each additional unit of labor decreases, leading to an increase in marginal cost. However, if the MPL curve is increasing or constant, the MC curve is not U-shaped.
Conclusion:
The AFC and MC curves do not exhibit a U-shape, while the ATC and AVC curves do. This is because fixed costs do not change with the level of output, and the MC curve is not always affected by diminishing marginal returns.
The U-shaped curve is a characteristic of the average variable cost (AVC) and average total cost (ATC) curves. However, the average fixed cost (AFC) and marginal cost (MC) curves do not exhibit a U-shape.
Average Fixed Cost (AFC) Curve:
The average fixed cost (AFC) curve is a rectangular hyperbola. It slopes downwards to the right but never touches the horizontal axis. This is because fixed costs remain constant, no matter what the level of output is. Therefore, as output increases, the fixed cost per unit decreases. AFC is calculated by dividing the total fixed cost by the level of output.
AFC = Total Fixed Cost / Quantity
As the level of output increases, the denominator increases, and hence the AFC decreases. Since the curve slopes downwards to the right, it never exhibits a U-shape.
Marginal Cost (MC) Curve:
The marginal cost (MC) curve is the slope of the total cost (TC) curve. It shows the additional cost incurred in producing one more unit of output. MC is calculated by dividing the change in total cost by the change in output.
MC = Change in Total Cost / Change in Quantity
The MC curve is U-shaped if the marginal product of labor (MPL) curve is diminishing. This is because the additional output produced by each additional unit of labor decreases, leading to an increase in marginal cost. However, if the MPL curve is increasing or constant, the MC curve is not U-shaped.
Conclusion:
The AFC and MC curves do not exhibit a U-shape, while the ATC and AVC curves do. This is because fixed costs do not change with the level of output, and the MC curve is not always affected by diminishing marginal returns.
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Community Answer
Which curve is never U-shaped?a)ATC curveb)AVC curvec)AFC curved)MC cu...
AFC Curve is Never U-Shaped
Explanation:
The different cost curves in microeconomics are as follows:
1. Average Fixed Cost (AFC) Curve
2. Average Variable Cost (AVC) Curve
3. Average Total Cost (ATC) Curve
4. Marginal Cost (MC) Curve
Out of these different cost curves, the AFC curve is never U-shaped.
Definition of AFC Curve:
The Average Fixed Cost (AFC) curve is a cost curve that shows the fixed cost per unit of output produced. In other words, it is the cost that a firm incurs in producing one unit of output, which includes all the fixed costs such as rent, salaries, and insurance premiums.
Characteristics of AFC Curve:
1. It slopes downwards continuously as the output increases.
2. The reason for the downward slope of the AFC curve is that the fixed cost is spread over a larger number of units as the output increases.
3. The AFC curve approaches zero as the output increases to infinity because the fixed cost is spread over an infinite number of units.
Why AFC Curve is Never U-shaped?
The AFC curve is never U-shaped because of the following reasons:
1. The AFC curve is downward sloping continuously as the output increases, which means that the cost per unit of output decreases as the output increases. Therefore, there is no point where the AFC curve starts to increase again.
2. The AFC curve approaches zero as the output increases to infinity. This is because the fixed cost is spread over an infinite number of units, and hence the cost per unit of output becomes negligible.
Conclusion:
Hence, it can be concluded that the AFC curve is never U-shaped because of its continuous downward sloping nature and approaching zero as the output increases to infinity.
Explanation:
The different cost curves in microeconomics are as follows:
1. Average Fixed Cost (AFC) Curve
2. Average Variable Cost (AVC) Curve
3. Average Total Cost (ATC) Curve
4. Marginal Cost (MC) Curve
Out of these different cost curves, the AFC curve is never U-shaped.
Definition of AFC Curve:
The Average Fixed Cost (AFC) curve is a cost curve that shows the fixed cost per unit of output produced. In other words, it is the cost that a firm incurs in producing one unit of output, which includes all the fixed costs such as rent, salaries, and insurance premiums.
Characteristics of AFC Curve:
1. It slopes downwards continuously as the output increases.
2. The reason for the downward slope of the AFC curve is that the fixed cost is spread over a larger number of units as the output increases.
3. The AFC curve approaches zero as the output increases to infinity because the fixed cost is spread over an infinite number of units.
Why AFC Curve is Never U-shaped?
The AFC curve is never U-shaped because of the following reasons:
1. The AFC curve is downward sloping continuously as the output increases, which means that the cost per unit of output decreases as the output increases. Therefore, there is no point where the AFC curve starts to increase again.
2. The AFC curve approaches zero as the output increases to infinity. This is because the fixed cost is spread over an infinite number of units, and hence the cost per unit of output becomes negligible.
Conclusion:
Hence, it can be concluded that the AFC curve is never U-shaped because of its continuous downward sloping nature and approaching zero as the output increases to infinity.
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Which curve is never U-shaped?a)ATC curveb)AVC curvec)AFC curved)MC curveCorrect answer is option 'C'. Can you explain this answer?
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