In the graph, the lowest AVC (at 4–5 units) comes before the lowest AC (at 5–6 units). Why? Short-run cost curves from the schedule. MC is 30, 20, 16, 14, 20, 32, 50 for the 1st to 7th unit, lowest at 14 for the 4th. AVC is 30, 25, 22, 20, 20, 22, 26, lowest at 20 for 4 and 5 units. AC (from 2 units) is 55, 42, 35, 32, 32, 34.57, lowest at 32 for 5 and 6 units. AFC falls from 30 at 2 units to 8.57 at 7. MC meets AVC at P (5 units, ₹20) and AC at Q (6 units, ₹32).

In the graph, the lowest AVC (at 4–5…

In the graph, the lowest AVC (at 4–5 units) comes before the lowest AC (at 5–6 units).

Question 46

MediumOriginal question

In the graph, the lowest AVC (at 4–5 units) comes before the lowest AC (at 5–6 units). Why?

Short-run cost curves from the schedule. MC is 30, 20, 16, 14, 20, 32, 50 for the 1st to 7th unit, lowest at 14 for the 4th. AVC is 30, 25, 22, 20, 20, 22, 26, lowest at 20 for 4 and 5 units. AC (from 2 units) is 55, 42, 35, 32, 32, 34.57, lowest at 32 for 5 and 6 units. AFC falls from 30 at 2 units to 8.57 at 7. MC meets AVC at P (5 units, ₹20) and AC at Q (6 units, ₹32).

AC does not include AVCCorrect answerYour answerMC is constantCorrect answerYour answerFixed cost rises with outputCorrect answerYour answerEven after AVC starts rising, falling AFC keeps pulling AC down for a whileCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

AC = AFC + AVC. Past 5 units AVC rises, but AFC is still falling.
AC keeps falling until the rise in AVC outweighs the fall in AFC, so its minimum comes later.

Concept: Minimum AVC before minimum AC
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe shapes of the cost curves

Practise this chapter →

Ten questions from Cost Curves, at your own pace.

Practise this chapter →

Ten questions from Cost Curves, at your own pace.

In the graph, the lowest AVC (at 4–5 units) comes before the lowest AC (at 5–6 units).

Question 46

Explanation