- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 3. Marginal Revenue, Marginal Cost and Profit Maximization
CFA Practice Question
When production increases, the average variable cost and average total cost curves ______.
B. become horizontal
C. cross
D. move closer together
A. spread further apart
B. become horizontal
C. cross
D. move closer together
Correct Answer: D
The two cost curves approach one another because as output increases, average fixed cost decreases.
User Contributed Comments 3
| User | Comment |
|---|---|
| Mariecfa | The vertical distance between ATC and AVC curves is equal to AFC. |
| fangluez | ATC=AFC+AVC. As units of output increase, AFC will decrease. Therefore ATC and AVC are moving closer. |
| Huricane74 | When production increases, but before the average fixed cost and the average variable cost curves intersect, they move closer together. If production continues to increase after the average fixed cost and average variable curves intersect, then they move further apart. |