Fixed costs as vertical distance in cost curves

Steps:

• Identify the variable cost curve, which starts at the origin and rises with output.
• Identify the total cost curve, which is parallel to the variable cost curve but shifted upward by a constant amount.
• Measure the vertical distance between the total cost and variable cost curves at any output level.
• This constant vertical gap represents fixed costs, independent of output.

Why A is correct:

• WX is the vertical distance between total and variable cost curves, matching the definition of fixed costs as constant expenses not varying with output.

Why the others are wrong:

• B. WY includes both fixed and variable costs, representing total costs.
• C. XY is a segment of the variable cost curve, varying with output.
• D. XZ spans the full total cost from origin, not isolating fixed costs.

Final answer: A