Question

As production increases, the gap between ATC and AVC:

Group of answer choices

increases.

is proportional to MC.

diminishes.

remains constant.

Answer 1

As production increases,the gap between ATC and AVC diminshes...this is the correct option.rest are incorrect.

reason- the gap between ATC and AVC becomes smaller or diminshes as AFC declines with the increase in production or output which results in the difference in ATC and AFC becomes smaller and smaller.since AFC keeps declining with the increase in production but it csn never becomes zero.

Option A increases is incorrect as it decreases with the decrease in AFC.THE gap between ATC and AVC . Or due to the fixed TFC ,the AFC reduces with the successive increase in level of output.

B is also incorrect as it is not proportional to MC ...as it diminshes with the increase in output snd marginsl means with the production of additional unit.

Option D is also incorrect as it will not remsin constant...when production will increase the gap will diminsh.between ATC and AVC.