The Following Graph Shows Average Fixed Costs, Average Variable Costs

question 124

Multiple Choice

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. Why does the distance between curves II and III get smaller as quantity increases?

• A) Marginal cost is increasing.
• B) Average variable cost is increasing.
• C) Average fixed cost is declining.
• D) Average fixed cost is increasing.

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Definitions:

Marginal Product

The increase in output that arises from an additional unit of input.

Domestic Investment

Investment in resources within a country, including physical assets like machinery and buildings, contributing to economic growth and development.

National Income Accounting

A system used by a country to measure the overall economic activity, including the total income earned by the nation and how it's used.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents over a specific period.