Q18 of 20 Page 3

The gap between AC and AVC keeps on decreasing with rise in outputs, but they never meet each other”. Comment.


AC and AVC will never meet in the short run because AC is the cost per unit of input employed. AC is derived from the sum of total variable cost and total fixed cost. Fixed costs remain constant in the short run. However, AVC is the cost per unit of variable input employed. Since AC also takes into account the fixed costs that is why SAC and SVC will never meet.


Source: NCERT


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