1. 1 ATC AVC MC Relationship Between Average and Marginal Costs Costs per unit 60 50 40 30 20 10 0 Quantity123456789 Q1Q1 B Q0Q0 A

2. 2 The U Shape of the Average and Marginal Cost Curves When output is increased in the short run, it can only be done by increasing the variable input. The law of diminishing productivity causes marginal and average productivities to fall. As average and marginal productivities fall, average and marginal costs rise.

3. 3 The Relationship Between Productivity and Costs Costs per unit 14 12 10 8 6 4 2 04812162024Output Output per worker 7 6 5 4 3 2 1 04812162024 Output A AVC AP of workers MC MP of workers