The average total cost curve and the average variable cost curve
A)are closer together as output increases, with average variable cost reaching its minimum level first
B)are closer together as output increases, with average total cost reaching its minimum level first
C)are farther apart as output increases, with average variable cost reaching its minimum level first
D)are farther apart as output increases, with average total cost reaching its minimum level first
E)are parallel to each other, and reach their minimum levels at the same rate of output

Question

Quizplus · Accepted Answer

As output increases, the fixed costs are spread over a larger number of units, causing the gap between the average total cost and the average variable cost curve to narrow. The average variable cost curve reaches its minimum level first because it only includes variable costs, while the average total cost curve includes both fixed and variable costs.

The Average Total Cost Curve and the Average Variable Cost