The average fixed cost for a firm
A) is constant at all levels of output.
B) is increasing over all levels of output.
C) first increases at an increasing rate and then declines.
D) first decreases and then increases as output increases.
E) is decreasing over all levels of output.

Question

Quizplus · Accepted Answer

Average fixed cost (AFC) decreases as output increases because the total fixed cost is spread over a larger number of units. Fixed costs do not change with the level of output, so as more units are produced, the cost attributed to each unit decreases.

The Average Fixed Cost for a Firm