1. The problem asks which graph correctly represents the relationship between average total cost (ATC), marginal cost (MC), and average variable cost (AVC) curves for a firm in the short run. 2. Key economic principles about these cost curves: - MC curve intersects both AVC and ATC curves at their minimum points. - AVC is always below ATC because ATC includes average fixed cost. - MC curve typically lies below ATC and AVC when costs are decreasing and above them when costs are increasing. 3. Analyze each graph description: - Graph 1: AVC lowest, ATC above AVC, MC curve crosses ATC and AVC from below. This matches the theoretical relationship. - Graph 2: MC above ATC and AVC, which is incorrect because MC must intersect ATC and AVC. - Graph 3: MC above ATC and AVC, all increasing, but MC does not intersect ATC or AVC, so incorrect. - Graph 4: MC highest, AVC lowest, but no mention of MC intersecting ATC or AVC, so incorrect. 4. Conclusion: Graph 1 correctly represents the relationship between ATC, MC, and AVC curves. Final answer: Graph 1 is correct.