If a firm incurs fixed costs the average variable cost curve will always lie below the average total cost curve.

Name: If a firm incurs fixed costs the average variable cost curve will always lie below the average total cost curve.
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Quizplus · Accepted Answer

This is because average total cost (ATC) includes both average fixed costs (AFC) and average variable costs (AVC). Since ATC = AFC + AVC, the AVC curve must always lie below the ATC curve as long as there are positive fixed costs.

If a Firm Incurs Fixed Costs the Average Variable Cost