Question

Explain the relationship between average product and average cost curve?

Answer 1

Product curves is upside-down, bowl-shaped curves that show the relationship between additional inputs, such as labor or capital, and how much of a good is actually produced. On the other hand, average cost curve is a graph of the costs of production as a function of total quantity produced. The average total cost curve is typically U-shaped. The relationship between product curve and average cost curve is that product curve show the relationship between output and the quantity of a factor; they therefore have the factor quantity on the horizontal axis while average cost curves show how costs vary with output and thus have output on the horizontal axis.