In the short run,as output gets larger:
A)fixed cost gets smaller.
B)the average variable cost curve gets closer to the average total cost curve.
C)marginal cost gets smaller.
D)average total cost decreases after the point of diminishing returns.

Question

Quizplus · Accepted Answer

In the short run, as output gets larger, the average variable cost curve gets closer to the average total cost curve. This is because fixed costs remain the same in the short run, and as output increases, the fixed cost is spread over more units of output, reducing the average fixed cost. However, the variable costs increase with the increase in output, causing the average variable cost to initially decrease and then start increasing at a higher rate. As a result, the average total cost initially decreases and then starts increasing at a higher rate due to the increasing average variable cost. Therefore, as output gets larger, the average variable cost curve gets closer to the average total cost curve.

In the Short Run,as Output Gets Larger