Question

Refer to Exhibit 7.3, which shows the U-shaped cost curves for a producer. A is the marginal cost curve, B is the average variable cost curve, and C is the average total cost curve. The vertical distance between lines B and C at any level of output represents _____

Answer 1

Answer:

average fixed cost

Explanation:

The difference between average total cost and average variable cost is the average fixed cost. Average total cost is the same as total cost per unit, and total cost includes both variable and fixed costs. Since the average variable cost already shows the variable costs per unit, the difference between them is equal to the fixed costs per unit.