As a firm's output expands,the
A)ATC will reach a minimum before the AVC.
B)AVC will reach a minimum before the ATC.
C)ATC and AVC will reach minimums at the same output.

Question

Quizplus · Accepted Answer

When a firm's output expands, the AVC will reach a minimum before the ATC. This is because as output increases, the fixed costs get spread out over a larger quantity of output, causing the ATC to decrease. However, as output increases beyond a certain point, the marginal cost (MC) of producing each additional unit of output starts to increase, causing the AVC to increase as well. This increase in AVC ultimately causes the ATC to start increasing again, but only after the minimum point of AVC has been reached. Thus, the AVC curve reaches its minimum before the ATC curve.

As a Firm's Output Expands,the