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Which one of the listed short-run cost curves is the only one that is never 'U' shaped?
AAverage total cost curve
BAverage variable cost curve
CAverage fixed cost curve
DMarginal cost curve
Answer & Solution
Correct answer: C. Average fixed cost curve
1. AVC, ATC and MC all fall, reach a minimum, then rise, giving the U shape.
2. AFC = TFC / Q falls continuously toward the X-axis without ever rising.
3. A curve that only falls cannot be U shaped, so the AFC curve is never U shaped.
4. ATC (A), AVC (B) and MC (D) are all U shaped. Hence the average fixed cost curve.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.6_
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