Question

Ise a clearly labelled diagram to explain the relationship between average cost and average variable cost

Answer 1

Answer:

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According to the law of constant returns when a firm employs more and more factors, output increases at a constant rate. Therefore, the average cost curve as well as marginal cost curve remains parallel to horizontal axis.

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Answer 2

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According to the law of constant returns when a firm employs more and more factors, output increases at a constant rate. Therefore, the average cost curve as well as marginal cost curve remains parallel to horizontal axis.