A firm's short-run average total cost curve is parallel to its short-run average variable cost curve.

Question

Quizplus · Accepted Answer

The short-run average total cost curve is not parallel to the short-run average variable cost curve because it includes both variable and fixed costs, while the average variable cost curve includes only variable costs. As output increases, the fixed costs are spread over more units, causing the average total cost curve to decline at a different rate than the average variable cost curve.

A Firm's Short-Run Average Total Cost Curve Is Parallel to Its