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CMA Foundation · Fundamentals of Business Economics and Management · Cost of Production

As output increases in the short run, the vertical distance between the total cost curve and the total variable cost curve is:

The vertical distance is constant and equals total fixed cost. Because total cost is fixed cost plus variable cost, subtracting variable cost always leaves fixed cost, which does not change with output in the short run, so the two curves are parallel in shape.

  1. AIncreasing continuously
  2. BDecreasing continuously
  3. CEqual to marginal cost at each output
  4. DConstant and equal to total fixed costCorrect

Explanation

Since TC = TFC + TVC, the gap TC - TVC equals TFC at every output. TFC does not vary with output in the short run, so the gap is constant. Marginal cost relates to the slope of the curves, not the gap between them.

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