Question

When a firm's average variable cost is constant—no matter how much is produced—then the firm's:

A. average cost will increase as the quantity produced increases.

B. fixed cost must be zero.

C. average cost will also be constant.

D. average fixed cost will also be constant.

E. average cost will decrease as the quantity produced increase

Answer 1

The correct answer is letter "B": fixed cost must be zero.

Step-by-step explanation:

The Average Cost (AC) is the total variable cost per unit of output. This is found by dividing the total variable cost by total output. The Average Cost is also found by adding the Average Variable Cost (AVC) to the Average Fixed Cost (AFC). If the AFC is zero, then the AVC will remain constant.