Question

Average fixed cost____________.

Answer 1

Answer:

d. declines continually as output increases.

Explanation:

The reason for this is that when because fixed cause remains the same as output increases the average fixed cost decreases when output increases. For example the fixed cost of a factory is 10,000 and it produces 100 units. In this case we will divide the fixed cost by the number of units to find the average fixed cost. 10,000/100=100

Now when we increase output to 200 the average fixed cost will decrease.

10,000/200=50.

Mathematically we can view this as the numerator is staying constant whereas the denominator is increasing when output increases, therefore average fixed cost is declining.