Diagrams of Cost Curves

Economists describe both short run and long run average cost curves as u shaped. Provide a brief explanation  why each of these curves might be considered u shaped.

Short Run Cost curves are U shaped because of diminishing returns. In the short run capital is fixed. After a certain point, increasing extra workers leads to declining productivity. Therefore, as you employ more workers the MC increases.

Diagram of Marginal Cost 

Because the short run Marginal cost curve is sloped like this, mathematically the average cost curve will be U shaped. You could give examples and work out the average cost.

Long Run Cost Curves

The long run cost curves are u shaped for different reasons. It is due to economies and diseconomies of scale. If a firm has high fixed costs, increasing output will lead to lower average costs.

However, after a certain output a firm may experience diseconomies of scale. Where increased output lead to higher average costs. For example, in a big firm it is more difficult to communicate and coordinate workers.

Diagram for Economies and Diseconomies of Scale 

 Note however, not all firms will experience diseconomies of scale. It is possible the LRAC could just be downward sloping