Average fixed cost (AFC) of a firm is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → total fixed cost per unit of output
Average fixed cost is total fixed cost spread over the units produced: AFC = TFC / q.
Option (1) total fixed cost per unit of output — Correct. TFC is divided by output.
Option (2) total cost minus total variable cost — Incorrect. TC minus TVC is TFC itself, not a per unit cost.
Option (3) the change in total fixed cost per unit of change in output — Incorrect. TFC does not change with output, so that change is zero. Marginal cost comes from total cost.
Option (4) total fixed cost per unit of the variable input — Incorrect. Costs are averaged over units of output; per unit of input is the idea behind average product.
NCERT (2026-27), Introductory Microeconomics, Glossary: “Average fixed cost – Total fixed cost per unit of output.” “3.7.1 Short Run Costs … In Table 3.3, we get the AFC-column by dividing the values of the second column by the corresponding values of the first column. Similarly, we get the AVC-column by dividing the values of the third column by the corresponding values of the first column. At zero level of output, both AFC and AVC are undefined. For the first unit of output, AFC is Rs 20 and AVC is Rs 10. Adding them, we get the SAC equal to Rs 30.” |