Average Total Cost, Average Variable Cost, and Marginal Cost The average variable cost (AVC), average total cost (ATC), and marginal cost (MC) curves are shown. The bowl shape of the AVC and ATC curves demonstrates the law of diminishing returns: Beyond a certain level of output, average costs increase. Marginal costs represent the added cost of producing one more unit of output. Note that the marginal cost curve passes through the minimum points on both the AVC and ATC curves.