Common Curve shapes

Question 1

1. Marginal Cost (MC) Curve

Answer 1

Shape: Nike swoosh or check mark shape.

Why: Initially falls due to increasing returns, then rises due to diminishing returns.

Question 2

2. Average Cost (AC) / Average Total Cost (ATC) Curve

Answer 2

Shape: U-shaped

Why- Falls at first due to spreading fixed costs, then rises as variable costs increase.

Question 3

Average Variable Cost (AVC)

Answer 3

Shape: U-shaped, but lies below AC.

Why: Follows similar reasoning to AC, but doesn’t include fixed costs.

Question 4

Marginal Revenue (MR)

Answer 4

SHAPE REASONING
Perfect competition: Horizontal line (perfectly elastic).

Imperfect competition (monopoly/oligopoly): Downward sloping straight line.

Question 5

Average Revenue (AR)

Answer 5

Perfect competition: Horizontal line (same as MR).

Imperfect competition: Downward sloping, typically above MR.

Question 6

Total Cost (TC) Curve

Answer 6

Shape: Starts above origin (fixed cost), then curves upward.

Why: Increases more rapidly as output increases due to rising MC.

Question 7

Total Revenue (TR) Curve

Answer 7

Perfect competition: Straight line from origin.

Imperfect competition: Curved, increases at a decreasing rate.