Figure 7-11
-Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?
A)The firm's technology may show increasing marginal returns as production increases from A to B.
B)The firm may have positive fixed costs.
C)As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently.
D)The firm's average fixed cost may rise as production increases from B to C.

Question

Figure 7-11 
-Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels.Which of the following statements must be wrong?
A)The firm's technology may show increasing marginal returns as production increases from A to B. 
B)The firm may have positive fixed costs. 
C)As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently. 
D)The firm's average fixed cost may rise as production increases from B to C.

Quizplus · Accepted Answer

The firm's average fixed cost decreases as production increases because fixed costs are spread over a larger number of units, not increases.

Figure 7-11 -Figure 7-11 Shows an Average Cost Curve with Points on with Points