Question

If the average variable cost is a u shape, it passes the minimum point of the marginal cost curve?

Answer 1

The statement that “If the average variable cost is a U shape, it passes the minimum point of the marginal cost curve,” is False. In fact, the marginal cost curve passes through the minimum point of the average variable cost curve. The U shape of average variable cost curve is due to the fact that initially with the increase in the output the total cost increases at a decreasing rate but after sometime the total cost starts to increase at an increasing rate as the level of output increases.