[amp_mcq option1=”Average Fixed Cost and Average Variable Cost” option2=”Total Fixed Cost and Average Variable Cost” option3=”Average Fixed Cost and Total Variable Cost” option4=”Total Fixed Cost and Total Variable Cost” correct=”option1″]<\/p>\n
The correct answer is: A. Average Fixed Cost and Average Variable Cost.<\/p>\n
Average total cost (ATC) is a measure of the average cost per unit of output produced. It is calculated by dividing total cost (TC) by the quantity of output (Q). ATC can be broken down into two components: average fixed cost (AFC) and average variable cost (AVC). AFC is the average cost per unit of output that is incurred due to fixed costs, while AVC is the average cost per unit of output that is incurred due to variable costs.<\/p>\n
The behavior of ATC is jointly determined by AFC and AVC. As output increases, AFC decreases because the fixed costs are spread over a larger number of units of output. AVC, on the other hand, increases as output increases because the variable costs per unit of output decrease as the fixed costs are spread over a larger number of units of output. The behavior of ATC is determined by the relationship between AFC and AVC. When AFC is greater than AVC, ATC is increasing. When AFC is less than AVC, ATC is decreasing. When AFC equals AVC, ATC is at its minimum point.<\/p>\n
Here is a graph that shows the relationship between ATC, AFC, and AVC:<\/p>\n
As you can see, the ATC curve is U-shaped. This is because AFC decreases as output increases, while AVC increases as output increases. The ATC curve reaches its minimum point when AFC equals AVC.<\/p>\n
I hope this explanation was helpful! Let me know if you have any other questions.<\/p>\n","protected":false},"excerpt":{"rendered":"
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