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Production and cost — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsProduction and cost3 Marks
Question
Define fixed cost. Give an example. Explain with reason the behaviour of Average Fixed Cost as output is increased.
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Answer

Fixed cost refers to the cost which does not change with change in output.

Example: rent, interest etc. (Any one)

As output increases AFC goes on falling continuously because,

$\text{AFC}=\frac{\text{TFC}}{\text{Output}}$ and TFC is constant.

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