The following is not correct
The following is not correct
- A) Average variable cost equals average total cost minus average fixed cost
- B) Average fixed cost equals average variable cost minus average total cost
- C) Average total cost equals average variable cost plus average fixed cost
- D) Average total cost minus average variable cost equals average fixed cost
Correct Answer: B) Average fixed cost equals average variable cost minus average total cost
Explanation
This question is asking which of the given options is not correct. The options are related to the concepts of average variable cost, average fixed cost, and average total cost.
Average variable cost (AVC) is the cost of producing each unit of output which varies with the level of output. Average fixed cost (AFC) is the fixed cost per unit of output, which decreases as the level of output increases. Average total cost (ATC) is the total cost per unit of output, which is the sum of average variable cost and average fixed cost.
Option A states that average variable cost equals average total cost minus average fixed cost. This is correct because ATC is the sum of AVC and AFC, so if we subtract AFC from ATC, we get AVC.
Option B states that average fixed cost equals average variable cost minus average total cost. This is not correct because AFC and AVC cannot be subtracted from ATC to get each other.
Option C states that average total cost equals average variable cost plus average fixed cost. This is correct because ATC is the sum of AVC and AFC.
Option D states that average total cost minus average variable cost equals average fixed cost. This is not correct because AFC and AVC cannot be subtracted from ATC to get each other.
Therefore, the correct answer is Option B.