-Some of the cost curves for Ike's Ice Cream Kitchen are given in the above figure. At which of the following levels of output will AFC be the lowest?
A) at 0 gallons
B) at 10 gallons
C) at 40 gallons
D) at 70 gallons

Question

-Some of the cost curves for Ike's Ice Cream Kitchen are given in the above figure. At which of the following levels of output will AFC be the lowest?
A) at 0 gallons 
B) at 10 gallons 
C) at 40 gallons 
D) at 70 gallons

Quizplus · Accepted Answer

AFC (Average Fixed Cost) decreases as output increases because fixed costs are spread over more units. Therefore, AFC will be lowest at the highest level of output, which is 70 gallons.

-Some of the Cost Curves for Ike's Ice Cream Kitchen