Asked by Michael Covino on Jun 24, 2024
Verified
As output increases, average fixed costs
A) increase.
B) decrease.
C) remain constant.
D) first increase and then decrease.
Average Fixed Costs
The total fixed expenses of a business divided by the quantity of units produced, decreasing as production increases.
- Interpret graphs and tables to determine cost relationships and cost behavior in a firm.
Verified Answer
JO
Jacob ObertJun 26, 2024
Final Answer :
B
Explanation :
As output increases, the total fixed costs are spread over more units of output, which results in a decrease in average fixed costs per unit. Fixed costs do not change with the level of output, so as output goes up, the cost allocated to each unit of output goes down.
Learning Objectives
- Interpret graphs and tables to determine cost relationships and cost behavior in a firm.