Question

Average fixed costs for a given level of output can be determined graphically by:

Answer 1

Answer:

The correct answer to the following question is option D) the vertical distance between ATC ( Average total cost ) and AVC ( Average variable cost ) .

Explanation:

AFC which is know as average fixed cost , can be taken out by dividing the total fixed cost from the total number of units produced. In the earlier phase , for the given number of units produced, both AVC and AFC curve would decrease, which would ultimately lead to fall in ATC. But when the units increase , the AVC would start to rise but AFC is still falling and due to this ATC would sill fall , because fall in AFC is still greater than rise in AVC . As output further rises , the AVC would keep on rising and would finally offset fall in AFC  and ATC would also start rising. Therefore AFC would be determined by vertical distance between ATC and AVC.