Which of the following equations is correct?Group of answer choicesAVC − ATC = AFCAVC + ATC = AFCAFC + AVC = ATCATC + AVC = AFC
Question
Which of the following equations is correct?Group of answer choicesAVC − ATC = AFCAVC + ATC = AFCAFC + AVC = ATCATC + AVC = AFC
Solution
The correct equation is AFC + AVC = ATC.
Explanation:
- AFC stands for Average Fixed Cost, which is the total fixed cost divided by the quantity of output.
- AVC stands for Average Variable Cost, which is the total variable cost divided by the quantity of output.
- ATC stands for Average Total Cost, which is the total cost divided by the quantity of output.
In cost accounting, the Average Total Cost (ATC) is the sum of the Average Fixed Cost (AFC) and the Average Variable Cost (AVC). This is because the total cost of production is made up of fixed costs and variable costs. Therefore, the correct equation is AFC + AVC = ATC.
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Which statement is true? Group of answer choicesMarginal cost intersects the maximum of AVC from below.Marginal cost intersects the minimum of AVC from below.Marginal cost intersects the minimum of AFC from below.The difference between AVC and ATC is AFC for every level of output.b and d are both true.
What is the relationship between Average Total Cost (ATC), Average Fixed Cost (AFC), and Average Variable Costs (AVC)?Question 16Select one:a.ATC = AFC / AVCb.ATC = AFC + AVCc.ATC = AFC * AVCd.ATC = AFC - AVC
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