-The above figure shows the costs at Barney's Bagel Bakery. At which of the following amounts of output is the AFC at its lowest?
A) At 3,500 bagels
B) At 2,000 bagels
C) At 3,000 bagels
D) None of the above because the AFC is constant regardless of how many bagels are produced each day.

Question

-The above figure shows the costs at Barney's Bagel Bakery. At which of the following amounts of output is the AFC at its lowest?
A) At 3,500 bagels 
B) At 2,000 bagels 
C) At 3,000 bagels 
D) None of the above because the AFC is constant regardless of how many bagels are produced each day.

Quizplus · Accepted Answer

AFC (Average Fixed Cost) decreases as output increases because fixed costs are spread over more units. Therefore, AFC is lowest at the highest output level, which is 3,500 bagels.

-The Above Figure Shows the Costs at Barney's Bagel Bakery