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), (C) and (D) only

The correct answer is Option (4) → (A), (C) and (D) only

(A) Both the average cost and average variable cost curves are U-shaped. Correct — Due to the law of variable proportions, both AC and AVC first fall and then rise, forming a U-shape.

(B) Average cost and average variable cost curves are parallel to each other. This is Incorrect. The vertical distance between the Average Cost (AC) and Average Variable Cost (AVC) curves is the Average Fixed Cost (AFC). Since $\text{AFC}=\text{TFC}/Q$ (Total Fixed Cost divided by Quantity), and TFC is constant, AFC continuously decreases as output ($Q$) increases. Therefore, the distance between AC and AVC continuously shrinks, meaning they are not parallel.

(C) Marginal cost is equal to both average cost and average variable cost at their respective minimum levels. Correct —The Marginal Cost (MC) curve intersects the Average Cost (AC) curve at its minimum point, and it also intersects the Average Variable Cost (AVC) curve at its minimum point. This is a fundamental property of the relationship between marginal and average values.

(D) Average cost and average variable cost can never be equal to each other. This is Correct. $\text{AC}=\text{AVC}+\text{AFC}$. Since Total Fixed Cost (TFC) is always positive in the short run (there is at least one fixed factor), Average Fixed Cost (AFC) is always positive ($\text{AFC}=\text{TFC}/Q>0$). Therefore, AC must always be greater than AVC, so they can never be equal.