Average total cost decreases with an increase in output because: A. the total va

Question

Average total cost decreases with an increase in output because: A. the total variable cost decreases with an increase in output B. the average fixed cost decreases with an increase in output C. the marginal cost of production increases with an increase in output D. diminishing marginal returns sets in after a particular level of production Average total cost decreases with an increase in output because: A. the total variable cost decreases with an increase in output B. the average fixed cost decreases with an increase in output C. the marginal cost of production increases with an increase in output D. diminishing marginal returns sets in after a particular level of production A. the total variable cost decreases with an increase in output B. the average fixed cost decreases with an increase in output C. the marginal cost of production increases with an increase in output D. diminishing marginal returns sets in after a particular level of production

Explanation / Answer

THe answer is B-)  the average fixed cost decreases with an increase in output.

because we know that Avergae total cost is comprosis of average variable cost and average fixed cost. and only average fixed cost decrease as the output is in denominatior and fixed cost is remain fixed through the whole production process. as the output getting bigger and bigger, the average fixed cost getting smaller and smaller. therefore, average total cost decrease with an increase in output because of the decrease in the average fixed cost.

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