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Which of the following cost curve will slope downward and does not touch the x-axis?
- a)Average cost curve
- b)Marginal cost curve
- c)Average variable cost curve
- d)Average fixed cost curve.
Correct answer is option 'D'. Can you explain this answer?
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Which of the following cost curve will slope downward and does not tou...
Average Fixed Cost Curve
Definition: The Average Fixed Cost (AFC) curve shows the fixed cost per unit of output. It is calculated by dividing the total fixed cost by the total number of units produced.
Slope: The AFC curve slopes downward because as output increases, the fixed cost is spread over a larger number of units, resulting in a lower average fixed cost per unit.
Touching x-axis: The AFC curve does not touch the x-axis because even when there is no output, there is still a fixed cost that needs to be incurred, such as rent, salaries, and other overhead expenses.
Relation to other cost curves:
- The Marginal Cost (MC) curve intersects the AFC curve at its minimum point because when MC is below AFC, AFC decreases; when MC is above AFC, AFC increases.
- The Average Variable Cost (AVC) curve also slopes downward but intersects the AFC curve at a point where the AVC curve is at its minimum.
Conclusion:
The Average Fixed Cost (AFC) curve is a crucial cost curve in economics as it helps businesses understand the impact of fixed costs on their operations. A downward-sloping AFC curve indicates that as output increases, the fixed cost per unit decreases, making it possible for the business to achieve economies of scale.
Definition: The Average Fixed Cost (AFC) curve shows the fixed cost per unit of output. It is calculated by dividing the total fixed cost by the total number of units produced.
Slope: The AFC curve slopes downward because as output increases, the fixed cost is spread over a larger number of units, resulting in a lower average fixed cost per unit.
Touching x-axis: The AFC curve does not touch the x-axis because even when there is no output, there is still a fixed cost that needs to be incurred, such as rent, salaries, and other overhead expenses.
Relation to other cost curves:
- The Marginal Cost (MC) curve intersects the AFC curve at its minimum point because when MC is below AFC, AFC decreases; when MC is above AFC, AFC increases.
- The Average Variable Cost (AVC) curve also slopes downward but intersects the AFC curve at a point where the AVC curve is at its minimum.
Conclusion:
The Average Fixed Cost (AFC) curve is a crucial cost curve in economics as it helps businesses understand the impact of fixed costs on their operations. A downward-sloping AFC curve indicates that as output increases, the fixed cost per unit decreases, making it possible for the business to achieve economies of scale.
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Which of the following cost curve will slope downward and does not tou...
Average fixed cost is downward sloping curve rest are U shaped curved
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Which of the following cost curve will slope downward and does not touch the x-axis?a)Average cost curveb)Marginal cost curvec)Average variable cost curved)Average fixed cost curve.Correct answer is option 'D'. Can you explain this answer?
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