Question

Match the following:

List - I	List - II
A. U-shaped curve	(i) AC = MC
B. Rectangular Hyperbola	(ii) TC
C. Continuously rising curve	(iii) AFC
D. Optimum output	(iv) AC

• A. A (iv), B (iii), C (ii), D (i)
• B. A (iii), B (ii), C (i), D (iv)
• C. A (ii), B (i), C (iii), D (iv)
• D. A (i), B (iv), C (ii), D (iii)

Answer 1

The correct option is A A (iv), B (iii), C (ii), D (i)

The average cost curve is a U shaped curve due to the law of variable proportions in the short run and the law of returns to scale in the long run.

The AFC curve is asymptotic to both the x and y axis as the fixed cost can never be 0 since fixed cost is positive. It slopes downwards throughout its length from left to right showing continuous fall in average fixed cost with an increase in output.

Total cost includes variable cost that is directly proportional to the level of production, thus the total cost is continuously rising.

The optimum output is at AC = MC as average cost is at its minimum at this point.