Final answer:
The vertical distance between ATC and AVC represents the average fixed cost (AFC), which indicates the fixed cost per unit produced.
Step-by-step explanation:
The vertical distance between average total cost (ATC) and average variable cost (AVC) measures the average fixed cost (AFC). This distance is the fixed cost spread over the units produced, which does not change with the level of output since fixed costs are constant regardless of the quantity produced.
ATC is calculated by dividing the total cost by the total quantity produced, and it typically presents a U-shaped curve. Similarly, AVC is the variable cost divided by the quantity produced and is illustrated by a U-shaped curve lying below the ATC curve. As output increases, the difference between ATC and AVC diminishes, indicating that the AFC is spread over a larger number of units, thus decreasing per unit.