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Questions
What is the behaviour of average fixed cost as output is increased? Why is it so?
Explain with reason the behaviour of Average Fixed Cost as output is increased.
Solution
Average fixed cost is the fixed cost per unit of output. Average fixed cost curve slopes downward to the right. It shows that AFC decreases as 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.
TFC = AFC* Q
Therefore
`AFC=(TFC)/Q`
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RELATED QUESTIONS
A firm’s average fixed cost, when it produces 2 units, is Rs 30. Its average total cost schedule is given below. Calculate its marginal cost and average variable cost at each level of output.
|
Output (units) |
1 |
2 |
3 |
|
Average Total Cost (Rs) |
80 |
48 |
40 |
What does the average fixed cost curve look like? Why does it look so?
Choose the correct alternative from given options:
Average fixed cost curve ____________.
Complete the following table :
| Output Units |
Marginal Cost Rs |
Average Variable Cost Rs | Total Cost Rs |
Average Fixed Cost Rs |
| 1 | 60 | ...... | 120 | ...... |
| 2 | ...... | ...... | 174 | ...... |
| 3 | ...... | 54 | ...... | ...... |
| 4 | 54 | ...... | ...... | 15 |
| 5 | ...... | 57 | 345 | ...... |
