Asked by Blaudia Stephanie on Jul 08, 2024
Verified
Average variable and average total costs get farther apart as output decreases because ________ as output decreases.
A) diminishing returns set in
B) average fixed costs increase
C) marginal costs increase
D) total and total variable costs get farther apart
Average Variable Costs
The total variable costs divided by the quantity of output produced, reflecting the average cost of producing each unit.
Average Fixed Costs
Costs in production that are stable and do not vary with the amount of output, divided by the quantity of goods produced.
Output
The total amount of goods or services produced by a person, machine, factory, country, etc., within a certain period.
- Investigate the patterns of cost curves (MC, AVC, AFC, TC, ATC) and explore their connections in the context of short-run production.
- Gain an understanding of the contribution of fixed costs to short-run operations and their influence on average costs.
Verified Answer
KK
Kayleigh KardosJul 13, 2024
Final Answer :
B
Explanation :
As output decreases, the total fixed costs are spread over fewer units, causing the average fixed cost per unit to increase. Since average total cost includes both average variable cost and average fixed cost, but average variable cost does not, the gap between average total cost and average variable cost widens as the average fixed cost per unit increases.
Learning Objectives
- Investigate the patterns of cost curves (MC, AVC, AFC, TC, ATC) and explore their connections in the context of short-run production.
- Gain an understanding of the contribution of fixed costs to short-run operations and their influence on average costs.