Question

As output is increased, the difference between average total cost and average variable cost
(a) deceases
(b) increases
(c) remains constant
(d) first increases then decreases

Answer 1

Answer:

b :increases

Explanation:

the average cost increases

Answer 2

In Microeconomics,as output expands,the difference between the Average Total Cost(ATC) and Average Variable Cost(AVC) remains constant.Hence,the correct answer is option c) or remains constant.

Explanation:

Total Cost(TC) in production is the summation of Total Fixed Cost(TFC) and Total Variable Cost(TVC).Now,TFC is fixed regardless of the production level or output level of the firm as the fixed inputs of factors of production are fixed regardless of the output level produced by the firm.Only,the variable inputs or factors of production will fluctuate or change according to the production level of the firm.Hence,TVC is the only cost component of the TC which will vary as production or output level will change.Therefore,any change in TVC will be equally reflected in TC as TFC is fixed always and TC will change in the same proportion or amount as TVC.Therefore,the difference between TC and TVC will always constant which is actually equal to TFC.Based on the same logic,the difference between ATC and AVC will also remain fixed regardless of the output level produced by the firm and is equal to Average Fixed Cost(AFC).