Micro

Production & Costs

Medium

Which of the following are correct about the short run cost concepts?

(A) Both the average cost and average variable cost curves are U-shaped.

(B) Average cost and average variable cost curves are parallel to each other.

(C) Marginal cost is equal to both average cost and average variable costs at their respective minimum levels.

(D) Average cost and average variable cost can never be equal to each other.

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(A), (C) and (D) only

✅ Correct Option: 4

(A) Both the average cost and average variable cost curves are U-shaped -> TRUE. Both AC and AVC curves exhibit U-shape due to the law of variable proportions in the short run.

(B) Average cost and average variable cost curves are parallel to each other -> FALSE. These curves are NOT parallel because the vertical distance between them equals AFC (Average Fixed Cost), which continuously decreases as output increases.

(C) Marginal cost is equal to both average cost and average variable costs at their respective minimum levels -> TRUE. MC intersects both AC and AVC at their minimum points, which is a fundamental principle in cost theory.

(D) Average cost and average variable cost can never be equal to each other -> TRUE. Since AC = AVC + AFC, and AFC is always positive (fixed costs exist), AC will always exceed AVC.

Hence, Option 4: (A), (C) and (D) only -> Statements A, C, and D are correct. The AC and AVC curves are both U-shaped, MC equals both at their minimum points, and AC can never equal AVC since AC always includes the positive AFC component. Statement B is incorrect because AC and AVC converge but are never parallel - the distance between them (AFC) continuously decreases -> correct

2025: 3 June Shift 2

When the additional unit of input is 'crowded' in the production, the output is proportionally less and............

2025: 13 May Shift 1

The point on the supply curve at which a firm earns only normal profit is called ...........

2026: 13 May Shift 1

Select the correct statements in the context of relation between AP and MP.

(A) As long as the value of MP remains higher than the value of the AP, the AP continues to rise.

(B) When AP falls, MP has to be less than AP.

(D) MP curve cuts AP curve from above at its minimum.

Choose the correct answer from the options given below:

2026: 19 May Shift 2

In the short run, when a fixed input is combined with increasing variable inputs, the following changes in Average Product (AP) and Marginal Product (MP) are witnessed. Select the correct order of such change starting with the first unit employment of variable input.

A. AP and MP both decrease and AP > MP

B. AP and MP both increase and AP < MP

C. AP intersects MP and after that AP > MP

D. AP = MP, for the first level of output

Choose the correct sequence from the options given below:

2025: 13 May Shift 2

Set of all possible combinations of the two inputs that yield the same maximum possible level of output is known as.........

2025: 30 May Shift 2

Arrange the given statements to show the impact on a firm's supply curve due to its determinants.

(A) Organisational innovation allows the firm to use fewer units of inputs.

(B) Any factor that affects a firm's marginal cost curve is a determinant of its supply curve.

(D) The marginal cost will shift downward.

Choose the correct answer from the options given below:

Solution

Related questions:

Keyboard Shortcuts

CUET Economics Past Year Questions (Topic-Wise)