A characteristic of the average fixed cost is that, it?

Assessment: JAMB UTME - Economics - 1999 Subject: Economics

Question 1 Report

A characteristic of the average fixed cost is that, it?
Answer Details
The correct answer is that the average fixed cost falls continuously but is never equal to zero. Average fixed cost (AFC) is the fixed cost per unit of output produced, and it decreases as output increases. This is because fixed costs are spread over a larger number of units, so the cost per unit decreases. However, AFC will never reach zero because even when no units are produced, fixed costs still exist. Therefore, AFC will always have a positive value, but it will continually decrease as output increases.
Read lesson note on Theory Of Costs (JAMB)
Read lesson note on The Theory Of Price Determination (JAMB)
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