Question

What cost measure is equal to AFC plus+AVC​? A. average total cost B. total cost C. marginal cost D. total variable cost All of the following cost measures reach their minimum points when they are equal to the value of marginal​ cost, except one. Which cost measure is the​ exception? A. average fixed cost B. average total cost C. average variable cost D. There is no​ exception; all three measures above reach their minimum values when they are equal to the value of marginal cost. As output​ increases, the vertical distance between average total cost and average variable cost curves gets​ _______ and equals​ _______. A. ​smaller; total fixed cost B. ​larger; average fixed cost C. ​smaller; average fixed cost D. ​larger; marginal cost

Answer 1

Answer:

The correct answer is option A.

The correct answer is option A.

The correct answer is option C.

Explanation:

The average fixed cost is the ratio of total fixed cost and total output. It measures the fixed cost per unit of output. The average variable cost is the ratio of total variable cost and total output. It measures the variable cost per unit of output.  

The sum of the average fixed cost and average variable cost is the average total cost. It is the ratio of the total cost of production and the total output produced. It measures the cost of production per unit of output.  

The marginal cost of production is the cost of producing an additional unit of output.  

The average total cost and average variable cost are at their minimum points when they are equal to the marginal cost. There is no such thing in the case of an average fixed cost. This is because the fixed cost is constant in the entire production process, so the average fixed cost goes on declining with the increase in output.  

As the level of output increases, the difference between the average total cost and average variable cost goes on declining. This is because the total fixed cost remains constant during the entire process. While the variable cost goes on increasing with the level of output. As the output increases this difference between smaller and becomes equal to average fixed cost.