Page 3 - HA-COST

4. AC & AVC

1) AC is greater than AVC by the amount of AFC.
2) The vertical distance between AC and AVC curves continues to fall with increase in
output because the gap between them is AFC, which continues to decline with rise in
output.
3) AC and AVC curves never intersect each other as AFC can never be zero.
4) Both AC and AVC curves are U shaped due to the Law of Variable Proportions.
5) MC curve cuts AVC and AC curves at their minimum points.
6) The minimum point of AC curve (point A ) lie always to the right of the minimum

point of AVC curve ( point B).