How would an increase in fixed cost affect average total cost?

An increase in fixed costs raises the total costs of production but does not affect variable costs. Since average total cost (ATC) is calculated by dividing total costs by the quantity of output, an increase in fixed costs will lead to a higher ATC, especially if output remains constant. This effect is more pronounced when production levels are low, as fixed costs are spread over fewer units. Conversely, as output increases, the impact on ATC diminishes since the fixed costs are distributed over a larger number of units.