Asked by carolette mckenzie on May 06, 2024
Verified
Average total cost is very high when a small amount of output is produced because
A) average variable cost is high.
B) average fixed cost is high.
C) marginal cost is high.
D) marginal product is high.
Average Fixed Cost
The fixed costs of production (expenses that do not change with the level of output) divided by the quantity of output produced.
Output
The total quantity of goods and services produced by an economy or a firm.
Average Total Cost
The total cost of production (fixed plus variable costs) divided by the quantity of output produced, a measure of per unit cost.
- Familiarize yourself with the impact that fixed costs have on the average total cost and how this impact varies with different levels of production.
Verified Answer
ZK
Zybrea KnightMay 07, 2024
Final Answer :
B
Explanation :
Average total cost is very high when a small amount of output is produced primarily because the average fixed cost is high. Fixed costs are spread over fewer units, leading to a higher cost per unit.
Learning Objectives
- Familiarize yourself with the impact that fixed costs have on the average total cost and how this impact varies with different levels of production.