State the reason why Total Variable Cost (TVC) curve and Total Cost (TC) curve are parallel to each other.

OR

State the reason behind U-shape nature of the Average Variable Cost curve.

The Total Variable Cost (TVC) and Total Cost (TC) curves are parallel to each other because of the Total Fixed Cost (TFC). Total Cost is the summation of Total Variable Cost and Total Fixed Cost. In the short run, the TFC is constant and parallel to the X-axis. The TFC is constant because the fixed cost does not change as there is an increase in output whereas the variable cost increases as there is an increase in output. Therefore TC takes the shape of TVC because of constant TFC. But TVC originates from zero but TC starts from the point of TFC.

Therefore because of constant TFC the TVC is parallel to TC.

OR

Average Variable Cost is U-shaped because of the Law of Variable Proportion. The Law of Variable Proportion states that as the production of output increases the variable inputs also increases at an increasing rate. When the output is further increases at the diminishing rate the variable cost will also increase in diminishing rate. When the output is maximum then the variable cost will fall. This nature of the variable cost depicts the U-shaped of the Average Variable Cost.