Question

Question 10

1. Refer to the following graph to answer the questions that follow.
   
   The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because:

   		the firm is able to purchase more capital and exploit economies of scale.
   		the firm experiences gains in productivity from employee specialization.
   		average total cost decreases as output increases.
   		average fixed cost decreases as output increases.
   		the firm is able to drive its competitors out of business by lowering its price.

2 points

Question 11

1. Refer to the following graph to answer the questions that follow.
   
   The gap between the average total cost (ATC) and average variable cost (AVC) curves represents:

   		average fixed cost.
   		total fixed cost.
   		average variable cost.
   		average total cost.
   		total variable cost.

Answer 1

1) The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because: average fixed cost decreases as output increases. the gap between ATC and AVC is AFC so as AFC declines both the curve converge towards each other.

2)The gap between the average total cost (ATC) and average variable cost (AVC) curves represents Average fixed cost.