Average total cost and average variable cost are minimized at the same level of output.

Question

Quizplus · Accepted Answer

Average total cost (ATC) and average variable cost (AVC) are minimized at different levels of output because ATC includes both variable and fixed costs, whereas AVC includes only variable costs. As output increases, AVC typically decreases at first but then may increase due to diminishing returns. ATC decreases as output increases up to a certain point due to the spreading out of fixed costs over more units, but it also eventually starts to increase due to rising AVC. Therefore, the minimum points of ATC and AVC do not coincide.

Average Total Cost and Average Variable Cost Are Minimized at the Same