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Question
Explain Average Fixed Cost curve.
Answer in Brief
Solution
The Average Fixed Cost (AFC) curve shows the average fixed cost carried by a firm per unit of production. The AFC is calculated as Total Fixed Cost (TFC) divided by Quantity of Output (Q).
`"AFC" = "TFC"/"Q"`
The curve shows the spreading effect of fixed costs over greater output, emphasising the significance of growing output in order to minimise the per-unit cost of fixed expenses.
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Cost - Average Cost
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