Explain The Relationships Between
1) MC,AVC,AC
2)TC,TVC,TFC
3)AC,AVC,AFC
Answers
Answer:
1) AVC is obtained by dividing the total variable cost by output, i.e., AVC = TVC/Q. Thus, AVC is a part of AC, given AC = AFC + AVC. ... AVC starts rising after OQ1 output is being produced; its rise over a certain range is offset by a fall in AFC. That is why AC continues to fall over that range of output even if AVC rises.
2) Since the TFC curve is horizontal, the difference between the TC and TVC curve is the same at each level of output and equals TFC. This is explained as follows: TC – TVC = TFC. The TFC curve is parallel to the horizontal axis while the TVC curve is inverted-S shaped.
3) AVC is obtained by dividing the total variable cost by output, i.e., AVC = TVC/Q. Thus, AVC is a part of AC, given AC = AFC + AVC. Furthermore, both the AVC and AC curves are U-shaped due to the operation of the law of variable proportions.
Explanation:
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