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JAMB Economics 1997 Question 13

Question 13

Theory of Costs and Revenue

In the diagram above, the curve which represents the firm's short-run average variable cost is curve

Diagram for this question
  1. A.I
  2. B.II
  3. C.III
  4. D.IV.
Show the answer and explanation

Answer: B (II)

Explanation

I keeps falling, so it is average fixed cost; IV is the steep marginal cost curve; III is average total cost. The lower U-shaped curve II, cut by MC at its lowest point before ATC, is average variable cost.