What are the average fixed cost, average variable cost and average cost of a firm ? How are they related ?

Class 11 Economics in Class 11 3 years ago

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SOLUTION :Average fixed cost (AFC) REFERS to the per unit fixed cost of PRODUCTION. Average variabe cost (AVC) refers to the per unit variable cost of production. Average cost (AC)refers to the per unit total cost of production. AC is the sum total of AFC and AVC.
"ImportantObservation: AC, AVC and AFC"
1.AC curve will always lie above the AVC curvebecause AC,at all levels of output includes both AVC and AFC.
2.AVC reaches its minimum point at a level of output lower than that of AC because when AVC is at its minimum point, AC is still falling because of falling AFC.
3.As the output increases,the gap between AC and AVC curves decreases,but, they NEVER intersect each other .It happens because the vertical distance between them is AFC , which can never be zero.

Posted on 11 Dec 2021, this text provides information on Class 11 related to Economics in Class 11. Please note that while accuracy is prioritized, the data presented might not be entirely correct or up-to-date. This information is offered for general knowledge and informational purposes only, and should not be considered as a substitute for professional advice.

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