The difference between average total costs and average variable costs is:
A) marginal cost.
B) average fixed cost.
C) fixed cost.
D) None of the preceding statements is correct.

Question

Quizplus · Accepted Answer

Average total cost (ATC) is the sum of average variable cost (AVC) and average fixed cost (AFC). Therefore, the difference between AVC and ATC is AFC, which is a fixed cost that does not vary with output. This is why the correct answer is average fixed cost (B). Marginal cost is the additional cost of producing one more unit of output, and fixed cost is not directly related to the level of output, so (A) and (C) are incorrect. (D) is incorrect because one of the answer choices is correct.

The Difference Between Average Total Costs and Average Variable Costs