If the average fixed cost of production is the fixed cost per unit of output produced. Then it will _____.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Decreases with increase in level of output.
Average fixed cost (AFC) falls as output rises, because the same fixed cost is spread over more and more units.
AFC = TFC ÷ q, where TFC is total fixed cost and q is output. TFC is a constant, so a larger q always gives a smaller AFC. The AFC curve is a rectangular hyperbola: AFC × q is always equal to TFC.
NCERT (2026-27): “Shapes of the Short Run Cost Curves … AFC is the ratio of TFC to q. TFC is a constant. Therefore, as q increases, AFC decreases. When output is very close to zero, AFC is arbitrarily large, and as output moves towards infinity, AFC moves towards zero. AFC curve is, in fact, a rectangular hyperbola. If we multiply any value q of output with its corresponding AFC, we always get a constant, namely TFC.… …Figure 3.4 shows the shape of average fixed cost curve for a typical firm. We measure output along the horizontal axis and AFC along the vertical axis.…”
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