Why is average total cost very high when a small amount of output is produced
A)Average variable cost is high.
B)Average fixed cost is high.
C)Marginal cost is high.
D)Marginal cost is low.

Question

Quizplus · Accepted Answer

When a small amount of output is produced, the fixed costs of production are spread over a smaller output, causing average fixed cost to be high. As output increases, fixed costs are spread over a larger output, causing average fixed cost to decrease. Therefore, average total cost is very high when a small amount of output is produced due to the high level of fixed costs.

Why Is Average Total Cost Very High When a Small