The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-The difference between average total cost and average variable cost decreases with an increase in output.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-The difference between average total cost and average variable cost decreases with an increase in output.

Quizplus · Accepted Answer

This is true. As output increases, the fixed costs are spread over a larger quantity of goods, causing the average fixed cost (part of the average total cost) to decrease. This decrease in average fixed cost offsets any increase in average variable cost, resulting in a decrease in the difference between average total cost and average variable cost.

The Figure Given Below Shows Three Short Run Average Total