Module 55 Featured Worksheet 2 Graphing Cost Curves Use the graph of the salsa market below and answer the following questions. Cost of case $250 MC 200 150 ATC . AVC 100 50 - .AFC 2 3 8 9 10 Quantity of salsa (cases) 1. Explain why the AFC curve decreases as output increases. 2. What is the difference between the ATC and AVC curves? 3. Use the MC curve on the graph to explain when this firm experiences diminishing returns. 4. Explain the significance of point M. 5. At any output less than the minimum-cost output, what can you say about ATC and MC? 6. At any output greater than the minimum-cost output, what can you say about ATC and MC? 7. Where does the MC cross the ATC curve? Explain why. 8. Draw a graph showing the relationship between ATC, AVC and MC for a firm with a "U- shaped" AVC curve