In the short run, the shape of marginal cost, average variable cost and short run average cost curves are:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → U-shaped
In the short run, the Marginal Cost (MC), Average Variable Cost (AVC), and Short Run Average Cost (SAC) curves are all U-shaped because of the Law of Variable Proportions.
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Initially, as production increases, efficiency improves — leading to falling costs.
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After a certain level of output, diminishing marginal returns set in, causing rising costs.
Thus, these curves first fall, reach a minimum point, and then rise, forming a U-shape.