Question
Explain the behaviour of average fixed cost using numerical example.
✓
Answer
- The per unit cost incurred on fixed factors of production is known as average fixed cost.
|
Units of commodity
|
TFC
|
AFC
|
|
0
|
60
|
-
|
|
1
|
60
|
60
|
|
2
|
60
|
30
|
|
3
|
60
|
20
|
|
4
|
60
|
15
|
|
5
|
60
|
12
|
$\text{AFC}=\frac{\text{TFC}}{\text{Output}}$and TFC remains constant.
So, as output increases, TFC remains constant, AFC falls.
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