In the short run, ATC curve and AVC curve converge as output increases because

Question

BlackTom AI · Accepted Answer

To analyze why ATC and AVC converge in the short run as output rises, we should look at how average costs relate to each other.
Option a: 'marginal cost is below average total cost.' While it’s true that MC below ATC tends to pull ATC down, this alone does not explain why ATC and AVC converge; convergence specifically depends on the relationship between AFC and the other components, not just MC vs ATC.
Option b: 'marginal cost is below average fixed cost.' This statement is generally false in the typical short-run range where MC interacts with AVC and ATC; AF C is a declining component, but MC being below AFC does not logically justify convergence of ATC and AVC.
Option c: 'average fixed costs continually increase.' This is incorrect because AFC decreases as output increases, not increases. Since AFC declines, it reduces the gap between ATC and AVC, not increases it.
Option d: 'average fixed costs continually decrease.' Correct. Since ATC = AVC + AFC, and AFC falls as output expands, the gap between ATC and AVC narrows, causing ATC and AVC to converge in the short run. This is the fundamental reason for their convergence as production rises.

THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

In the short run, ATC curve and AVC curve converge as output increases because

View Explanation

Log in for full answers

Similar Questions

If a firm's average total cost decreases as the firm increases its output, the firm's marginal cost must be

When the average total cost curve is at its minimum, we know that the

When the average variable cost curve is upward sloping, the marginal cost curve:

When the average variable cost curve is upward sloping, the marginal cost curve:

If the marginal cost curve is U-shaped,

In the diagram, A represents a firm's ___ curve, B represents its _ curve, and C represents its ___ curve.

If a new tax on capital increases a firm’s fixed cost of production, which of the following will occur in the short run?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

In the short run, ATC curve and AVC curve converge as output increases because

View Explanation

Log in for full answers

Similar Questions

If a firm's average total cost decreases as the firm increases its output, the firm's marginal cost must be

When the average total cost curve is at its minimum, we know that the

When the average variable cost curve is upward sloping, the marginal cost curve:

When the average variable cost curve is upward sloping, the marginal cost curve:

If the marginal cost curve is U-shaped,

In the diagram, A represents a firm's _____ curve, B represents its _____ curve, and C represents its _____ curve.

If a new tax on capital increases a firm’s fixed cost of production, which of the following will occur in the short run?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

In the diagram, A represents a firm's ___ curve, B represents its _ curve, and C represents its ___ curve.