Question:
Which one of the following statements concerning short-run costs is false?
(1) Average Total Cost and Average Variable Cost curves are U-shaped.
(2) The gap between Average Total Cost and Average Variable Cost is marginal cost.
(3) The gap between Average Total Cost and Average Variable Cost narrows as output increased.
(4) Marginal cost curve cuts the Average Variable Cost at its minimum point.
(5) Marginal cost curve cuts the Average Total Cost curve at its minimum point.
Correct Answer:
(2)
Answer Explanation:
The vertical gap between the Average Total Cost (ATC) and Average Variable Cost (AVC) curves represents the Average Fixed Cost (AFC), not the Marginal Cost. AFC continually declines as output increases.
Topic: Costs of Production Year: 2023
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