As output decreases, in the short run
A) the difference between average total cost and average variable cost increases.
B) the difference between total cost and average variable cost increases.
C) marginal cost eventually decreases.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

As output decreases in the short run, fixed costs remain constant while variable costs decrease, causing average total cost (ATC) to increase at a faster rate than average variable cost (AVC). This widens the gap between ATC and AVC.

As Output Decreases, in the Short Run