Choose the correct statements from the options given below in terms of the shapes of the short run cost curves.

(A) Average fixed cost curve is a rectangular hyperbola.
(B) Total fixed cost is horizontal straight line.
(C) Average variable cost is upward sloping.
(D) Marginal cost is U shaped.

Choose the correct answer from the options given below:

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

The correct answer is Option (2) → (A), (B) and (D) only

• (A) Average fixed cost curve is a rectangular hyperbola. (Correct). The formula is $\text{AFC}=\text{TFC}/Q$. Since TFC is a constant, the product $\text{AFC}\times Q$ is constant, which defines a rectangular hyperbola.

• (B) Total fixed cost is a horizontal straight line. (Correct). Total fixed cost (TFC) does not change with the level of output ($Q$), so when plotted against $Q$, it is a horizontal line.

• (C) Average variable cost is upward sloping. (Incorrect). The Average Variable Cost (AVC) curve is typically U-shaped in the short run, meaning it initially falls, reaches a minimum, and then rises (becomes upward sloping).

• (D) Marginal cost is U shaped. (Correct). The Marginal Cost (MC) curve is U-shaped due to the Law of Variable Proportions (or diminishing marginal returns). It initially falls and then rises, intersecting the AVC and ATC curves at their minimum points.