Question

The curves A, B, and C are this color printer maker's: minimum minimumA of curve C c of curve color printers long-run total cost curves. long-run average cost curves. short-run total cost curves. short-run average total cost curves.

Answer 1

Option D.

• The curves A, B and C are this colour printer maker's short run average total cost curves.
• The average total cost curves are usually U shaped in short run.
• These curves at start begin to fall until they reach a point where their value drops to minimum and again after certain point starts to rise.
• We know that the average total cost curve is the sum of the average fixed cost and average variable cost. Both of these costs fall at the beginning which explains the reason why the average total cost curves also fall at the beginning in short run.
• It continues to fall and reaches a minimum point as the average fixed cost also continues to fall while the average variable cost rises.
• But With the further increase in the average variable cost, the fall in average fixed cost is neglected and the average total cost curve begins to rise again in short run.
• This explains the U shape of the short run average total cost curves.