PRC-3 · Chapter 12 · Question 22 of 69
As a factory ramps up its production volume to very high levels, its Average Fixed Cost (AFC) curve behaves in which characteristic way?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It continuously slopes downward, approaching zero but never touching it
Explanation
Because total fixed cost is a constant number, dividing it by an increasingly larger quantity of output means the average fixed cost per unit gets smaller and smaller.
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