El. Explain why Average Total lCosts {ATCJ declines through the production quanties. Only with the tenth unit per hour does the firm see a minor increase in ATC. The ATC initially drops due to the relationship of units produced, average variable cost, and fixed cost. As the units produced rises, the xed cost stays the same, and the variable cost rises at a slower rate than the units produced the Average Total Cost decreases. Explain why Average Fixed Cost (AFC) declines across all levels of production. \"What do you call this phenomenon? The average xed cost declines because of its direct relationship to the number of units produced. Because the fixed cost remains the same the more units produced for that fixed cost the lower the average fixed cost becomes per unit. For example, if there is a fixed cost of $19!] no matter if you produce one unit or ten, the average of that fixed cost goes down proportionately as the number of units produced increases. Explain why Marginal Costs initially decline but then increase with the sixth unit of production. 'Which short run production principle is at work here in creating this pattern of Marginal Costs? The increase is due to the rule of diminishing returns because as the total cost of producing a single unit increases eventually the marginal cost per until will increase as well