Why does the difference between average cost curve and average variables cost curve gradually decline?
Dear student,
The difference between the AC and AVC curve is the AFC curve. As the level of output increases the AFC becomes smaller and smaller. Accordingly, the difference between AC and AVC tends to diminish. However, it must be noted that as AFC is a rectangular hyperbola the two curves would never intersect each other.
The difference between the AC and AVC curve is the AFC curve. As the level of output increases the AFC becomes smaller and smaller. Accordingly, the difference between AC and AVC tends to diminish. However, it must be noted that as AFC is a rectangular hyperbola the two curves would never intersect each other.