Question

In the short run, average total costs and average variable costs converge as output increases because:________

Answer 1

Average fixed costs continually decrease is the correct answer. The average costs assist in identifying the costs related to producing a single unit, whereas the total cost of production aids businesses in understanding the entire expenses incurred.  

The total fixed cost is divided by the quantity of units produced to get the average fixed cost. The fixed cost incurred in producing a unit of output is known as the average fixed cost.

Any increase in output reduces the average fixed cost because Total Fixed Cost is constant. Though the average fixed cost can go very small, it will always exist.

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