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Portia owns and manages a sporting apparel company. Consider the given average cost (AC), average variable cost (AVC), and marginal cost (MC) curves for track suits. All but the MC curve have been placed incorrectly. Portia knows that the minimum average cost for a track suit is $7 and the minimum of average variable cost is $5.

Required:
Draw the AC and AVC curves so that they are consistent with the marginal cost curve.

Answer :

Answer:

AVC curve will be below the AC curve

Explanation:

As we know,

[tex]AC = AFC + AVC[/tex]

This means that Average cost is the sum of average fixed cost and Average variable cost. Thus it can be shown that AC curve will be above the AVC curve.

Also we know that MC curve is upward sloping.

Thus, the MC curve will cut the AVC curve first and it will be to the right of the point where the MC curve cuts the AC curve.

So the curve must look like,

View image VIRTUEMATANE

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