CA Foundation Exam > CA Foundation Questions > In the short run, when the output of a firm i...
Start Learning for Free
In the short run, when the output of a firm increases, its average fixed cost :
- a)increases.
- b)decreases.
- c)remains constant.
- d)first declines and then rises.
Correct answer is option 'B'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
In the short run, when the output of a firm increases, its average fix...
Explanation:
Average fixed cost (AFC) is the fixed cost per unit of output. It is calculated by dividing the total fixed cost (TFC) by the total output (Q).
Formula: AFC = TFC/Q
Short Run: In the short run, at least one factor of production is fixed and cannot be changed. For example, a firm may have a fixed amount of capital such as a building, machinery or land.
When the output of a firm increases, the average fixed cost will decrease due to the spreading effect of fixed cost over a larger output.
Example:
Suppose a firm has a fixed cost of $1000 and produces 100 units of output, then AFC will be:
AFC = TFC/Q = $1000/100 = $10
If the firm increases its output to 200 units, then AFC will be:
AFC = TFC/Q = $1000/200 = $5
Therefore, as the output increases, the fixed cost is spread over a larger number of units, reducing the average fixed cost.
Conclusion:
In the short run, when the output of a firm increases, its average fixed cost decreases. Therefore, option 'B' is the correct answer.
Average fixed cost (AFC) is the fixed cost per unit of output. It is calculated by dividing the total fixed cost (TFC) by the total output (Q).
Formula: AFC = TFC/Q
Short Run: In the short run, at least one factor of production is fixed and cannot be changed. For example, a firm may have a fixed amount of capital such as a building, machinery or land.
When the output of a firm increases, the average fixed cost will decrease due to the spreading effect of fixed cost over a larger output.
Example:
Suppose a firm has a fixed cost of $1000 and produces 100 units of output, then AFC will be:
AFC = TFC/Q = $1000/100 = $10
If the firm increases its output to 200 units, then AFC will be:
AFC = TFC/Q = $1000/200 = $5
Therefore, as the output increases, the fixed cost is spread over a larger number of units, reducing the average fixed cost.
Conclusion:
In the short run, when the output of a firm increases, its average fixed cost decreases. Therefore, option 'B' is the correct answer.
Free Test
FREE
| Start Free Test |
Community Answer
In the short run, when the output of a firm increases, its average fix...
Decrease is a correct answer
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer?
Question Description
In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? 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 In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer?.
In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? 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 In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer?.
Solutions for In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer?, a detailed solution for In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice In the short run, when the output of a firm increases, its average fixed cost :a)increases.b)decreases.c)remains constant.d)first declines and then rises.Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup