Question

Which of the following curves is of shape of English letter 'U'?

• A. Total fixed cost curve
• B. Total cost curve
• C. Total variable cost curve
• D. None of these

Hint:

The total cost curve typically forms a 'U' shape due to economies of scale followed by diseconomies of scale.

Answer 1

The Correct Option is B

Step 1: Understanding the shapes of cost curves.
In economics, cost curves represent the relationship between the quantity of output produced and the total cost of production. The total cost curve generally has a 'U' shape, which reflects the phenomenon of economies of scale followed by diseconomies of scale. At first, as production increases, the cost per unit decreases due to economies of scale, leading to a downward slope. Eventually, as production continues to increase, the cost per unit rises due to diseconomies of scale, resulting in an upward slope.

Step 2: Analyzing the options.
(A) Total fixed cost curve: This curve does not have a 'U' shape. The total fixed cost curve is horizontal because fixed costs do not change with the level of output.
(B) Total cost curve: Correct. The total cost curve has a 'U' shape as explained earlier. Initially, it slopes downward due to economies of scale, then slopes upward due to diseconomies of scale.
(C) Total variable cost curve: The total variable cost curve typically increases as output increases, but it does not have a 'U' shape; it usually has an upward slope.
(D) None of these: This is incorrect, as option (B) is the correct answer.

Step 3: Conclusion.
The correct answer is (B) Total cost curve, as it is the curve that forms a 'U' shape.