Question

Average fixed costs a. will always decrease as output expands. b. will always increase as output increases. c. will remain unchanged as output expands. d. are defined as the change in total costs divided by the change in output.

Answer 1

Average fixed costs will remain unchanged as output expands. (Option C)

Explanation:

Let us understand what is AFC (Average fixed cost) & Fixed cost:

Fixed cost: The value of the product does not fluctuate from time to time.

AFC: Fixed cost (F) divided by the quantity

When the "total number of good produced, the average fixed costs is expected to get decreased". The reason is that, the average fixed costs span across all the item.

According to the calculation of Average fixed cost, it remains unchanged even when the output changes.

AFC becomes significant when we have to take decision about production.