Question

AVC curve cannot touch AC(ATC) curve because ______.

Options

• MC starts falling

• AFC is always positive

• AFC is falling

• none of these

Answer 1

AVC curve cannot touch  AC(ATC) curve because AFC is always positive.

Explanation:

• AVC (Average Variable Cost) + AFC (Average Fixed Cost) = AC (Average Cost or ATC).
• The AVC curve can never touch or cross the AC curve since the AFC is always positive (although it decreases as output rises).
• AFC is the difference between AC and AVC, and since AFC > 0, AVC will always be lower than AC.