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प्रश्न
What is the behaviour of (a) Average Fixed Cost and (b) Average Variable Cost as more and more units of a good are produced?
उत्तर
a) Average fixed cost is the fixed cost per unit of output produced. It slopes downward to the right because AFC decreases as the output increases. It is a rectangular hyperbola curve. It means that the product of AFC and output is equal to TFC which remains constant at all levels of output. AFC is Rs 2.5 for 2 units of output produced at Point A as shown in the diagram.
TFC = AFC × Q
AFC =`"TFC"/Q`
b). Average variable cost is the variable cost per unit of output produced. It is a U-shaped curve because AVC decreases as output increases till it reaches Point K and it starts increasing as shown in the diagram. It is the law of variable proportion.
AVC = `"TVC"/Q`
