Question

What is the relation between Average Variable Cost and Average Total Cost, if Total Fixed Cost is zero ?

Answer 1

We know that:

$TC=TFC+TVC$

Dividing both the sides by 'Q', we get

$\frac{TC}{Q}=\frac{TFC}{Q}+\frac{TVC}{Q}$

$ATC=0+AVC$ $[\therefore TFC=0]$

Hence, $ATC=AVC$

Graphically, both the cost curves will intersect each other.