The Vertical Distance Between a Firm's Average Total Cost Curve

question 482

Multiple Choice

The vertical distance between a firm's average total cost curve, ATC, and its average variable cost curve, AVC

• A) decreases as output increases.
• B) is equal to its marginal cost, MC.
• C) is equal to its total fixed cost, TFC.
• D) is equal to its average product.

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Definitions:

Predetermined Overhead Rate

A rate calculated by dividing estimated overhead costs by an allocation base, used to allocate overhead costs to products or services.

Direct Labor-Hours

A measure of the total hours worked by employees directly involved in manufacturing a product or providing a service.

Manufacturing Overhead

Manufacturing overhead encompasses all production costs other than direct materials and direct labor, including expenses like factory equipment maintenance and utilities.

Direct Materials

Materials that are directly used in the production of a product and can be physically and easily traced to it.