Asked by Caitlin Gamble on May 06, 2024
Verified
Describe the relationship between average variable cost and average total cost. How are the general shapes of the AVC and ATC curves related?
Average Total Cost
Average total cost is the total cost of production divided by the quantity of output produced, including both fixed and variable costs.
Average Variable Cost
The total variable costs (costs that change with the level of output) divided by the quantity of output produced.
AVC Curve
Stands for Average Variable Cost curve, illustrating the average variable costs of production at different output levels.
- Explain the relationship between average variable cost, average total cost, and marginal cost.
Verified Answer
LS
Laura SalinasMay 06, 2024
Final Answer :
ATC = AVC + AFC, so the vertical distance between the AVC and ATC curves is the value of AFC for that level of output. Both AVC and ATC are typically U-shaped. The vertical distance between the two curves, however, is steadily declining as output increases because AFC is steadily declining.
Learning Objectives
- Explain the relationship between average variable cost, average total cost, and marginal cost.