Question

What happens to atc and abc when production is increased?

Answer 1

AVC increases as MC isabove AVC. This means that the MC curve must intersect the AVC at the minimum of AVC. ... Notice that ATC and AVC get vertically closerand closer together as output increases. This is because ATC = AVC + AFC, and AFC is gettingsmaller and smaller as output increases.

On the other hand, average total cost (ATC) is the sum of average fixed cost (AFC) and average variable cost (AVC). In short, ATC= AFC + AVC. The shape and behaviour of ATC curve depands upon the behaviour of AFC curve and AVC curve.