Question

The minimum point of the ATC is at a higher volume of output than the minimum point of AVC curve, because _______________.

• A. the AFC curve always declines as output increases
• B. the AFC curve always increases as output increases
• C. the ATC curve always increases as output increases
• D. none of these

Answer 1

The correct option is A the AFC curve always declines as output increases

The average fixed cost will continue falling as more outputs are produced as the lump sum cost initially paid is spread out over a larger quantity of output produced, thus this tends to drag the total cost down even if the variable cost curve begins to rise due to the law of variable proportions.