PRC-3 · Chapter 12 · Question 14 of 69
As a firm's production volume increases to massive levels, the Average Fixed Cost (AFC) curve behaves in what specific manner?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It continuously slopes downward, getting closer and closer to zero
Explanation
Since total fixed cost is a constant number, dividing it by an increasingly larger output (Q) means the AFC gets smaller and smaller, approaching (but never reaching) zero.
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