Identifying Total Cost from Diagram Distances

Steps:

• Locate the total cost (TC) curve, which combines fixed and variable costs.
• Identify the output level on the horizontal axis where distances are measured.
• Measure vertical distances from the origin: to variable cost (VC) curve for VC, to TC curve for total cost.
• The distance to TC curve equals fixed cost (FC) plus VC.

Why A is correct:

• WX is the vertical distance from the origin to the TC curve at the specified output, equaling total cost per the formula TC = FC + VC.

Why the others are wrong:

• B. WY measures to the VC curve, representing only variable cost.
• C. XY is the gap between TC and VC curves, representing fixed cost.
• D. XZ likely spans beyond the relevant curves, not matching any standard cost component.

Final answer: A