As a firm increases its output, the average fixed cost?

As a firm increases its output, the average fixed cost tends to fall continuously. This is because fixed costs are spread over a larger quantity of output, leading to a decrease in the average fixed cost. For example, if a factory has a fixed cost of $10,000 per month and produces 1,000 units, the average fixed cost per unit is $10. However, if the factory increases its production to 2,000 units, the average fixed cost per unit decreases to $5, since the fixed cost is spread over a larger quantity of output. Therefore, as the firm increases its output, the average fixed cost decreases continuously, while the variable cost per unit may increase due to the law of diminishing marginal returns.