What are the shapes of the AVC curve and the ATC curve and why do they have these shapes?
What will be an ideal response?
The average variable cost (AVC), and average total cost (ATC) curves are both U-shaped.
• The marginal cost (MC) curve shows how total cost changes when output increases by one unit. If the MC curve lies below the AVC curve, AVC is falling. Diminishing marginal returns means that eventually the MC curve slopes upward. At some point the MC curve lies above the AVC curve, and the AVC curve is upward sloping.
• ATC is the sum of average fixed cost (AFC) and AVC. Initially the ATC curve falls as the quantity produced increases because the AFC is initially quite large, but drops rapidly as total fixed costs are spread over greater levels of output. However, eventually diminishing returns cause marginal product to fall below average product, and average product decreases. As a result AVC increases as the quantity produced increases. If AVC rises more quickly than AFC falls, then the ATC curve is upward sloping.
You might also like to view...
Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________. 
A. Rising; A B. Falling; A; C C. Falling; B: C D. Rising; A; C
A recent study indicated that "Stricter college alcohol policies such as raising the price of alcohol, or banning alcohol on campus, decreases the number of students who use marijuana"
This indicates that the cross-price elasticity between alcohol and marijuana is positive. Indicate whether the statement is true or false
John Amaker owns orange groves and hires pickers for a two-week period as shown in Table 7-3.Table 7-3 Pickers Oranges Picked 1 1,000 2 2,000 3 3,000 4 3,900 5 4,700 6 5,400 7 6,000 8 6,200 9 6,000 In Table 7-3, the marginal physical product of the fifth picker is
A. 4,700. B. 900. C. 800. D. 3,900.
Monetary policy involves the use of money and credit controls to impact the macroeconomy.
a. true b. false