Refer to Figure 5.2, which shows a family of average cost curves. Why does the vertical distance between Curve 1 and Curve 2 decrease as output increases from Q1 to Q2?
A. Because average variable cost first decreases, then increases as output increases from Q1 to Q2.
B. Because average fixed cost decreases as output increases from Q1 to Q2.
C. Because average total cost first decreases, then increases as output increases from Q1 to Q2.
D. Because average variable cost increases faster than average fixed cost as output level approaches Q2.
Answer: B
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