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Why does the difference between ATC and...

Why does the difference between ATC and AVC decrease with increase in level of output Explain.

Text Solution

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Given that ATC =AFC +AVC
`:. ATC -AVC =AFC`
`AFC =(TFC)/("Output ")`
`by definition TFC is constant. Therefore as output is increased AFC falls
Since AFC =ATC -AVC , the difference between
ATC and AVC falls as output is increased.
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