CFA Practice Question

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CFA Practice Question

When production increases, the average variable cost and average total cost curves ______.

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.
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