Question

Consider a firm's short-run cost curves. If average total cost is increasing as output rises, then
Select one:
a. total fixed costs must be increasing
b. average variable cost must be increasing,
c. marginal cost must be below average total cost.
d. average fixed costs must be increasing.
e, average total cost is no longer equal to the sum of average variable cost and average fixed cost.​

Answer 1

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Answer 2

Option (a) total fixed costs must be increasing if the average total cost is increasing as output rises.

What happens to the average fixed cost when production increases in the short term?

In the short term, as a company's output increases, its average fixed cost decreases. Fixed costs remain the same regardless of the number of products produced. As performance improves, the fixed cost contribution per unit decreases.

On the short-term curve, much of the initial downslope is due to lower average fixed costs. Increasing the variable input return at low output levels also plays a role, but the slope is due to the decreasing limit variable input return.

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