Question:
In the short run, the vertical distance between the Average Total Cost (ATC) and Average Variable Cost (AVC) curves:
(1) Increases as output increases.
(2) Decreases as output increases.
(3) Remains constant as output increases.
(4) Is equal to Marginal Cost.
(5) Is equal to Total Fixed Cost.
Correct Answer:
(2)
Answer Explanation:
The vertical distance between ATC and AVC represents Average Fixed Cost (AFC). Since AFC = Total Fixed Cost / Output, as output increases, AFC continuously decreases, meaning the two curves get closer together (converge).
Topic: Costs of Production Year: 2024
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