PRC-3 · Chapter 12 · Question 35 of 69
As a factory drastically increases its volume of production, what happens to the Average Fixed Cost (AFC) curve?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It continuously falls, approaching zero but never touching it
Explanation
Because the total fixed cost is a constant number, dividing it by an increasingly large quantity of output means the average fixed cost per unit continuously decreases.
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