In the short run and long run, the shapes of the cost curves for a typical firm are defined as

(A). SMC curve cuts the AVC curve from below at its minimum point.
(B). LRAC curve cuts the LRMC curve from below at the minimum point of LRMC.
(C). SMC curve cuts the SAC curve from below at the minimum point of SAC.
(D). Average fixed cost curve is downward sloping.

Choose the correct answer from the options given below:

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

The correct answer is Option (1) → (A), (C) and (D) only

(A) SMC curve cuts the AVC curve from below at its minimum point — True. This is a fundamental property of cost curves in the short run.

(B) LRAC curve cuts the LRMC curve from below at the minimum point of LRMC — False. In reality, the LRMC cuts the LRAC from below at the minimum point of LRAC.

(C) SMC curve cuts the SAC curve from below at the minimum point of SAC — True. Similar to the AVC, the SMC intersects SAC at its minimum point.

(D) Average fixed cost curve is downward sloping — True. As output increases, fixed cost is spread over more units, so AFC continuously falls.