The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves.

Question

Quizplus · Accepted Answer

The average-total-cost curve reflects the shape of both the average-fixed-cost and average-variable-cost curves because it is derived from the sum of these two costs divided by the quantity of output produced. As output increases, average fixed costs decrease, and average variable costs initially decrease and then increase, which influences the U-shape of the average total cost curve.

The Average-Total-Cost Curve Reflects the Shape of Both the Average-Fixed-Cost