Question

Average fixed costs______________.

A. will remain unchanged as output expands.
B. are defined as the change in total costs divided by the change in output.
C. will always increase as output increases.
D. will always decrease as output expands.

Answer 1

D) Will always decrease as output expands

Step-by-step explanation:

Average fixed costs are equal to fixed costs divided by output:

AFC = Fixed Costs / Output

If output increases, then average fixed costs will decrease, because the denominator of the formula will become larger. In other words, the same fixed costs will be enough to produce a higher amount of ouput.