11. Suppose a firms\' average variable cost curve has the typical U-shaped form,

Question

11. Suppose a firms' average variable cost curve has the typical U-shaped form, if so, then the following is true: A) The average variable cost curve reaches a minimum point where it intersects the marginal cost curve.* B) The firms' average product of labour curve must have an inverted U-shape.» C) The firms' average product of labour curve reaches a maximum where the output of that labour is equal to the output where the average variable cost curve is minimized D) If the marginal cost falls below the average variable cost curve, then the average variable cost curve is downward sloping. E) All of the above F) A& B. G) A & C H) A & D I) A, B& D J) None of the above.

Explanation / Answer

The right answer is option H. A & D

Explanation: The MC curve first declines and after a certain level of output, it again goes up. The marginal cost curve and the average cost curve intersects at the point at which average cost is minimum. Also, when the marginal cost curve goes below the average variable cost curve, the average variable cost curve slopes downward.

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