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As output increases, average fixed cost:
- a)Remains constant
- b)Starts falling
- c)Start rising
- d)None
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
As output increases, average fixed cost:a)Remains constantb)Starts fal...
Explanation:
Average fixed cost (AFC) is the total fixed cost divided by the quantity produced. As output increases, the total fixed cost remains fixed, but the average fixed cost decreases.
Reasons:
There are several reasons why average fixed cost decreases as output increases:
1. Spread Over a Larger Output: Fixed costs are spread over a larger number of units as output increases. This means that the average fixed cost per unit decreases.
2. Economies of Scale: As a firm produces more output, it may benefit from economies of scale. This means that the cost per unit of output decreases as output increases.
3. Specialization of Labor: As output increases, the firm may be able to specialize the work of its employees more effectively. This can lead to higher productivity and lower costs per unit of output.
Graphical Representation:
The graphical representation of the AFC curve is a rectangular hyperbola, which means that as output increases, AFC approaches zero but never reaches it.
Conclusion:
In conclusion, as output increases, average fixed cost decreases due to spreading fixed costs over a larger output, benefiting from economies of scale, and specialization of labor.
Average fixed cost (AFC) is the total fixed cost divided by the quantity produced. As output increases, the total fixed cost remains fixed, but the average fixed cost decreases.
Reasons:
There are several reasons why average fixed cost decreases as output increases:
1. Spread Over a Larger Output: Fixed costs are spread over a larger number of units as output increases. This means that the average fixed cost per unit decreases.
2. Economies of Scale: As a firm produces more output, it may benefit from economies of scale. This means that the cost per unit of output decreases as output increases.
3. Specialization of Labor: As output increases, the firm may be able to specialize the work of its employees more effectively. This can lead to higher productivity and lower costs per unit of output.
Graphical Representation:
The graphical representation of the AFC curve is a rectangular hyperbola, which means that as output increases, AFC approaches zero but never reaches it.
Conclusion:
In conclusion, as output increases, average fixed cost decreases due to spreading fixed costs over a larger output, benefiting from economies of scale, and specialization of labor.
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Community Answer
As output increases, average fixed cost:a)Remains constantb)Starts fal...
Obviously Afc falls with increase in output because it is calculated from tfc and q where tfc is a constant value and q that is output is increasing...AFC =TFC /Q
Thus numerator remains constant and Denominator is increasing and this results in fall in value
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As output increases, average fixed cost:a)Remains constantb)Starts fallingc)Start risingd)NoneCorrect answer is option 'B'. Can you explain this answer?
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