For any given level of output, there is a tradeoff: a choice between lower fixed cost and higher variable cost, or higher fixed cost and lower variable cost. ATC₁ is the average total cost curve corresponding to a fixed cost of $108; it leads to lower fixed cost and higher variable cost. ATC₂ is the average total cost curve corresponding to a higher fixed cost of $216 but lower variable cost. At low output levels, at 4 or fewer cases of salsa per day, ATC₁ lies below ATC₂: average total cost is lower with only $108 in fixed cost. But as output goes up, average total cost is lower with the higher amount of fixed cost, $216: at more than 4 cases of salsa per day, ATC₂ lies below ATC₁.