Question

Hi guys.....
why does the difference between average cost curve and average variable cost curve gradually decline.​

Answer 1

Answer:

The difference between the AC and AVC curve is the AFC curve. As the level of output increases the AFC becomes smaller and smaller. Accordingly, the difference between AC and AVC tends to diminish.

Answer 2

1. Average cost is the sum of average variable cost and average fixed cost.
2. Average fixed cost =Total fixed cost/ quantity
3. As number of units produced increases the total fixed cost remaining constant, average fixed cost will go on declining.
4. This decline will lower the average cost and bring the average cost curve closer to average variable cost curve.