Question

Average fixed cost​ (AFC) A. rises as output rises. B. falls as output falls. C. is always fixed across all output ranges for the given production function. D. rises as output falls.

Answer 1

Answer:

D. rises as output falls.

Explanation:

Average fixed cost refers to the fixed cost per unit. Average fixed costs can, therefore, be described as the production's fixed costs divided by the output. Fixed costs are the expenses that remain constant in a period.

Average fixed costs will decline as production increases. Fixed costs are constant; diving them with a large output means spreading them in many quantities. For example, if the fixed costs are $1000 and the output is 2000, the average fixed cost will be $0.5. If the production increases to 4000, then the average fixed cost will decrease to $0.25. A decline in production results in high average fixed costs.