The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-When the marginal-cost curve lies above the average-total-cost curve, the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-When the marginal-cost curve lies above the average-total-cost curve, the average-total-cost curve slopes up and the average-variable-cost curve slopes down.

Quizplus · Accepted Answer

When the marginal-cost curve lies above the average-total-cost curve, it indicates that the average total cost is increasing. However, the direction of the slope of the average-variable-cost curve depends on its position relative to the marginal-cost curve, not the position of the marginal-cost curve relative to the average-total-cost curve.

The Figure Given Below Shows Three Short Run Average Total