Final answer:
The vertical distance between ATC and AVC is equal to the Average Fixed Cost (AFC), as ATC minus AVC equals AFC.
Step-by-step explanation:
The vertical distance between the Average Total Cost (ATC) and the Average Variable Cost (AVC) of a firm is equal to the Average Fixed Cost (AFC).
Therefore, the correct answer is a. AFC. The ATC is calculated by dividing the Total Costs (TC) by the quantity of output, while AVC is computed by dividing the Total Variable Costs (TVC) by the quantity of output. The difference between ATC and AVC is the AFC, which is derived from dividing the Total Fixed Cost (TFC) by the quantity of output.
The vertical distance between the average total cost (ATC) and average variable cost (AVC) is equal to the average fixed cost (AFC).
This is because AFC represents the fixed cost per unit of output, which does not vary with the level of production. The difference between ATC and AVC is therefore equal to the fixed cost per unit, which is AFC.
For example, if the ATC is $10 and the AVC is $6, the AFC would be $4 ($10 - $6 = $4).