At one unit of output AVC is

Question

Quizplus · Accepted Answer

At one unit of output, AVC is equal to marginal cost because AVC is the variable cost per unit divided by the quantity produced and at one unit of output, both variable cost and quantity produced are the same. Therefore, AVC = VC/Q = MC. Option A is incorrect because AVC can never be zero as long as there are some variable costs involved. Option B is incorrect because AVC cannot be infinite as long as output is positive. Option D is also incorrect because AVC cannot be less than MC in the short run since the minimum point of AVC curve is the same as the MC curve, assuming diminishing marginal returns to variable inputs.

At One Unit of Output AVC Is