When a firm's output level is high,
A) AVC dominates ATC so ATC begins to rise more rapidly
B) AFC dominates ATC so AFC begins to rise more rapidly
C) AFC dominates AVC so AFC begins to rise more rapidly
D) ATC dominates MC so MC begins to fall more rapidly
E) AVC dominates MC so MC begins to fall more rapidly

Question

Quizplus · Accepted Answer

When a firm's output level is high, the Average Variable Cost (AVC) becomes a larger component of the Average Total Cost (ATC), causing the ATC to rise more rapidly due to the influence of increasing AVC, especially when economies of scale are exhausted and diminishing returns set in.

When a Firm's Output Level Is High