The ATC curve is essential when determining if a firm is earning profits or incurring losses. Therefore, the AVC curve is the key to determining whether a firm will operate in the short-run when incurring losses. The AFC curve is the least important curve and will never need to be drawn because the AFC value can be determined by the vertical distance between the ATC and AVC curves. The “U” shape of the ATC and AVC curves reflect how returns change as more variable inputs are added to a fixed facility size. This video is made for 1st year college students or AP/IB Economics students. It focuses on foundational economic concepts.

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