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The total variable cost curve starts from the origin and initially rises at a decreasing rate, then later at an increasing rate. This shape is explained by:
AIncreasing and then diminishing returns to inputs
BThe constancy of fixed costs across output
CAverage fixed cost falling continuously to zero
DLong-run economies and diseconomies of scale
Answer & Solution
Correct answer: A. Increasing and then diminishing returns to inputs
1. TVC begins at the origin because variable cost is zero when output is zero.
2. Initially increasing returns to the variable input make output cheap to expand, so TVC rises slowly (decreasing rate).
3. Later, diminishing returns require ever-larger input doses, so TVC rises faster (increasing rate).
4. This is the law of increasing then diminishing returns, not fixed-cost behaviour (A, C) or long-run scale effects (D). Hence option B.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.5_
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