If ATC = $10,AVC = $8,AFC = $2 and MC = $12,then:

Question

Quizplus · Accepted Answer

Since MC > AVC and AVC > AFC, the firm is producing at a level where it is adding more to its total cost than it is adding to its total variable cost, and therefore increasing its average variable cost.

Since ATC = AVC + AFC, and the AFC is $2 while the AVC is $8, it means that the ATC is $10, which is also the same as the MC. This implies that the firm is operating at the point where ATC is equal to the minimum point of the AC curve, therefore at the upward-sloping section of its ATC curve.