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A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output?
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A firm’s average fixed cost is Rs.20 at 6 units of output. What will i...
Average Fixed Cost Calculation
Average fixed cost (AFC) is a company's fixed costs divided by the quantity of goods produced. It is calculated as follows:
AFC = Fixed Costs / Quantity of Output
Given Information
A firm has an average fixed cost of Rs. 20 at 6 units of output.
AFC Calculation at 3 Units of Output
To calculate the average fixed cost at 3 units of output, we can use the given formula:
AFC = Fixed Costs / Quantity of Output
Let's assume that the fixed cost of the firm remains constant at Rs. 120 (20 x 6). To calculate the average fixed cost at 3 units of output, we can plug in the values:
AFC = 120 / 3
AFC = Rs. 40
Explanation
The average fixed cost of the firm increases from Rs. 20 to Rs. 40 when the output is reduced from 6 units to 3 units. This is because the fixed costs remain constant, but they are now spread over a smaller quantity of goods produced. As a result, the average fixed cost per unit increases.
This increase in the average fixed cost is important for firms to consider when making production decisions. They need to ensure that they can sell enough goods to cover their fixed costs and keep their average fixed cost per unit at a reasonable level.
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A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output?
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A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output?.
A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A firm’s average fixed cost is Rs.20 at 6 units of output. What will it be at 3 units of output?.
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