Page 3 - HA-COST

2. AC curve always lies above the AVC curve. It’s because AC includes both

AVC and AFC.

3. AC curve moves closer and closer to AVC but the AC curve never touches

the AVC curve. The distance between the AC curve and the AVC curve
measures the AFC. The AFC keeps on falling but it never touches the X-axis.

4. When AVC starts increasing AC still decreases as AFC is decreasing.

5. AVC reaches its minimum point before the AC.

6. The shape of AFC curve is rectangular hyperbola. As the level of output
increases, AFC continuously falls.

ASSESSMENT

1. AFC always falls with an increase in level of output because_____.

(a) Less fixed factor used
(b) Price paid to fixed factor begins to fall
(c) Expenses incurred on fixed factor do not change

(d) None of the above
Ans-(c)

2. The _______ short run cost curve is also known as rectangular hyperbola.
(a) AFC
(b) TVC

(c) TFC
(d) AVC
Ans-(d)
3. The shape of _______ curve is also known as rectangular hyperbola.

(a) AC
(b) AFC