The minimum short-run average total cost occurs at a level of output that is greater than that at which average variable cost is at a minimum.

Question

Quizplus · Accepted Answer

The minimum point of the short-run average total cost curve occurs at a higher level of output than the minimum point of the average variable cost curve because average total cost includes both average variable cost and average fixed cost, and as output increases, the spread of fixed costs over more units of output lowers the average total cost further, even after average variable cost starts to rise.

The Minimum Short-Run Average Total Cost Occurs at a Level