Figure 5.1
-Refer to Figure 5.1, which shows a family of average cost curves. Why does the vertical distance between Curve 1 and Curve 2 decrease as output increases from Q1 to Q2?
A)Because average variable cost first decreases, then increases as output increases from Q1 to Q2.
B)Because average fixed cost decreases as output increases from Q1 to Q2.
C)Because average total cost first decreases, then increases as output increases from Q1 to Q2.
D)Because average variable cost increases faster than average fixed cost as output level approaches Q2.

Question

Figure 5.1
-Refer to Figure 5.1, which shows a family of average cost curves. Why does the vertical distance between Curve 1 and Curve 2 decrease as output increases from Q1 to Q2?
A)Because average variable cost first decreases, then increases as output increases from Q1 to Q2. 
B)Because average fixed cost decreases as output increases from Q1 to Q2. 
C)Because average total cost first decreases, then increases as output increases from Q1 to Q2. 
D)Because average variable cost increases faster than average fixed cost as output level approaches Q2.

Quizplus · Accepted Answer

The vertical distance between Curve 1 (average total cost) and Curve 2 (average variable cost) decreases as output increases because average fixed cost, which is the difference between the two, decreases as output increases.

Figure 5.1 -Refer to Figure 5.1, Which Shows a Family of Average