The average fixed cost curveGroup of answer choicesalways declines with increased levels of output.always rises with increased levels of output.declines as long as it is above marginal cost.declines as long as it is below marginal cost.
Question
The average fixed cost curveGroup of answer choicesalways declines with increased levels of output.always rises with increased levels of output.declines as long as it is above marginal cost.declines as long as it is below marginal cost.
Solution
The average fixed cost curve always declines with increased levels of output.
Here's why:
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Fixed costs are costs that do not change with the level of output. Examples include rent, salaries, and equipment.
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The average fixed cost (AFC) is calculated by dividing the fixed cost by the quantity of output produced.
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As the level of output increases, the same fixed cost is spread over more units of output. This means that the AFC per unit of output decreases.
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Therefore, the AFC curve always declines with increased levels of output. This is a fundamental principle of economics.
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