Question:
All of the following cost curves are 'U' shaped except the:
All of the following cost curves are 'U' shaped except the:
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The AFC curve is unique because it is the only short-run cost curve that decreases continuously as output expands, forming a rectangular hyperbola rather than a U-shape.
Updated On: Aug 24, 2026
- Average variable cost curve
- Average fixed cost curve
- Average total cost curve
- Marginal cost curve
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The Correct Option is B
Solution and Explanation
Step 1: Understanding the Concept:
Short-run cost curves reflect the relationship between output levels and the cost of production, governed by the Law of Variable Proportions.
Step 2: Detailed Explanation:
Let us analyze the shapes of the standard short-run cost curves:
- Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC): These curves are classically U-shaped. They initially decline due to increasing marginal returns and specialization, reach a minimum, and then rise due to the law of diminishing marginal returns.
- Average Fixed Cost (AFC): Since total fixed cost ($TFC$) is constant, AFC is calculated as:
\[ \text{AFC} = \frac{\text{TFC}}{\text{Output}} \]
As output increases, the constant $TFC$ is spread over more units, causing AFC to decline continuously. It never rises and asymptotically approaches both axes, forming a rectangular hyperbola.
Step 3: Final Answer:
The Average Fixed Cost curve is not U-shaped, corresponding to Option (B).
Short-run cost curves reflect the relationship between output levels and the cost of production, governed by the Law of Variable Proportions.
Step 2: Detailed Explanation:
Let us analyze the shapes of the standard short-run cost curves:
- Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC): These curves are classically U-shaped. They initially decline due to increasing marginal returns and specialization, reach a minimum, and then rise due to the law of diminishing marginal returns.
- Average Fixed Cost (AFC): Since total fixed cost ($TFC$) is constant, AFC is calculated as:
\[ \text{AFC} = \frac{\text{TFC}}{\text{Output}} \]
As output increases, the constant $TFC$ is spread over more units, causing AFC to decline continuously. It never rises and asymptotically approaches both axes, forming a rectangular hyperbola.
Step 3: Final Answer:
The Average Fixed Cost curve is not U-shaped, corresponding to Option (B).
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