Question:
Which of the following costs must continuously decrease as output increases in the short run?
(1) Total variable cost
(2) Total fixed cost
(3) Average variable cost
(4) Average fixed cost
(5) Average total cost
Correct Answer:
(4)
Answer Explanation:
Average Fixed Cost (AFC) is Total Fixed Cost divided by output. Since Total Fixed Cost remains constant regardless of output in the short run, spreading this fixed number over a larger and larger output causes AFC to continuously decline.
Topic: Costs of Production Year: 2022
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