The Vertical Distance Between Average Total Cost and Average Variable

question 121

Multiple Choice

The vertical distance between average total cost and average variable cost curves decreases as output increases because

• A)it is traditional to draw the curves that way.
• B)marginal cost first falls and then rises.
• C)in geometry, both curves must reach their minimums on the marginal cost curve.
• D)marginal product first rises and then falls.
• E)average fixed cost decreases as output increases.

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Definitions:

Realized Gains

Profits that are recognized when assets are sold for a price higher than their book value.

Equity Method

is an accounting technique used to record investments in associated companies where the investor has significant influence but not full control.

Cost Method

An accounting method used to value holdings in another company at the cost of acquisition plus any additional costs incurred.

Carrying Amount

The value at which an asset is recognized on the balance sheet after deducting any accumulated depreciation and impairment losses.