Login

Why does the difference between Average Total Cost and Average Variable Cost decrease with an increase in the level of output? Can these two be equal at some level of output? Explain.

the difference between ATC and AVC is equal to Average fixed cost which decreases with an increase in output because of constant Total fixed cost . So average total cost and average variable cost cannot be equal at any time as TFC is constant and AFC is average of TFC . so average can never be zero

  • 7
View Full Answer
Why does the difference between average total cost and average variable cost decrease with an increase in the level of output? can those two be equal at some level of output? explain

  • -4
As we increase the level of output, the difference between ATC and AVC decreases because ATC = AFC + AVC and Total Fixed Cost remain constant at all levels of output, but with rise in level of output, AFC decreases. That's why the difference between ATC and AVC decreases with rise in level of output.The difference between the average total cost (ATC or AC) and the average variable cost (AVC) lies due to the average fixed cost incurred by the firm. Thus, ATC and AVC can never be equal at any level of output.
  • 1
What are you looking for?