As output increases, AVC approaches ATC because of
A) decreasing average fixed cost.
B) increasing marginal cost.
C) diseconomies of scale.
D) diminishing marginal returns.

Question

Quizplus · Accepted Answer

As output increases, the average fixed cost (AFC) decreases because the fixed costs are spread over a larger number of units, which causes the average variable cost (AVC) to approach the average total cost (ATC) since ATC = AVC + AFC.

As Output Increases, AVC Approaches ATC Because of