Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$

Above 10 units of output,the average fixed cost in Table 21.2
A)Rises above $2.00.
B)Remains constant.
C)Stays below $0.50.
D)Continues to decline.

Question

Table 21.2 $\begin{array}{|l|r|r|r|r|}
\hline \text { Output (units per day) } & 0 & 10 & 20 & 30 \
\hline \text { Total cost (dollars per day) } & \$ 40 & \$ 54 & \$ 62 & \$ 80\
\hline
\end{array}$

Above 10 units of output,the average fixed cost in Table 21.2
A)Rises above $2.00.
B)Remains constant.
C)Stays below $0.50.
D)Continues to decline.

Quizplus · Accepted Answer

Fixed costs are costs that do not change with the level of output. In this table, when output is 0, the total cost is $40, which represents the total fixed cost (since there are no variable costs when there is no output). To find the average fixed cost (AFC) at different levels of output, we divide the total fixed cost by the quantity of output. As output increases, the AFC (which is $40 divided by the number of units) continues to decline because the fixed cost ($40) is spread over an increasing number of units.

Table 212 Above 10 Units of Output,the Average Fixed Cost in Table