The difference between $A C$ curve and $A V C$ curve decreases with increase in output but the two curves never touch each other. Justify the statement with the help of a diagram.

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Solution

The difference between AC curve and AVC curve decreases with increase in output but the two curves never touch each other because AC is the average of total fixed cost and total variable cost whereas, AVC is the average of total variable cost only. We know average of total fixed cost and variable cost is higher than the average of total variable cost only.

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The difference between AC curve and AVC curve decreases with increase in output but the two curves never touch each other. Justify the statement with the help of a diagram.

The difference between $A C$ curve and $A V C$ curve decreases with increase in output but the two curves never touch each other. Justify the statement with the help of a diagram.