A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then

A) average fixed cost will increase.
B) average total cost will decrease.
C) average fixed cost will necessarily be below average variable cost.
D) average total cost will be less than average variable cost.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced; it shows the variable cost per unit.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, decreases as production increases.

Average Total Cost

The total cost of production divided by the quantity of output produced, representing the cost per unit of production.