At zero level of output, if the total cost(TC) is 20. What will be the value of the Average Fixed cost (AFC) at the 6th level of output?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 3.33
We are given:
-
Total Cost (TC) at zero output = 20
Since no output is produced, this entire cost is the Fixed Cost (FC). -
Output level = 6 units
To find Average Fixed Cost (AFC):
AFC=Total Fixed Cost / Output = 20 / 6 = 3.33