Table 13-3
Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month.
-Refer to Table 13-3.At what level of output will average variable cost equal average total cost?
A)when marginal cost equals average variable cost
B)when marginal cost equals average total cost
C)there is no level of output where this occurs, as long as fixed costs are positive
D)this holds true for all levels of output in which average variable cost is falling

Question

Table 13-3
Consider the following firm which makes high-performance racing bicycles.All costs are given in dollars.Output is shown on a monthly basis.The firm's fixed costs include a rent of $800 and a lease cost of $400 per month. 
-Refer to Table 13-3.At what level of output will average variable cost equal average total cost?
A)when marginal cost equals average variable cost 
B)when marginal cost equals average total cost 
C)there is no level of output where this occurs, as long as fixed costs are positive 
D)this holds true for all levels of output in which average variable cost is falling

Quizplus · Accepted Answer

Average variable cost (AVC) can never equal average total cost (ATC) as long as there are positive fixed costs, because ATC includes both AVC and average fixed costs (AFC). Since AFC is always positive when fixed costs are positive, ATC will always be higher than AVC.

Table 13-3 Consider the Following Firm Which Makes High-Performance Racing Bicycles.All Costs