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.
AFC=TFC/ Q
where
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TFC = Total Fixed Cost (remains constant),
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Q = Quantity of output produced.
As production (Q) increases, the same fixed cost is spread over more units, so AFC continuously falls.