Short-term Average Cost curve is U-shaped. This means that first, this curve decreases, and after reaching the minimum point, it starts moving upwards. It explains the definition of variable proportion. The law of variable ratio states that initially (unless fixed factor residue remains) the variable factor MP (marginal product) increases. And, finally (fixed factor and variable factor after reaching their ideal ratio or optimal ratio), the MP of variable factor increases.

Let the variable factor L (labour) and fixed factor be the capital. When the MPL rises, it means L. Increasing output means higher growth in AP than every additional unit of increasing MP. It is seen from a different angle, this means that the requirement of L per unit of production decreases (in case of rising return for one factor). Ultimately it means that the cost of the variable unit (L) of the output starts to fall. Or, that AVC is a habit of falling, actually the opposite situation is decreasing when the operation is decreasing. Thus, AVC takes U-shape AC = AVC + AFC. AFC only falls in the form of increase in production and its components (in TC) gradually decrease with the increase in production.

Thus, initially falling AFC combines with falling AVC to cause falling AC. Subsequently, AFC tends to be very very small, so that, while it is falling, it no longer obstructs the pace of rising AC (owing to rising AVC) to any meaningful extent. Hence, the final conclusion is that AC along with AVC tends to be U-shaped in accordance with the law of variable proportions.