Question

Terms such as "overhead," "Direct," and "indirect" (in reference to expenses) can be vague, tend to change by industry, and may even be intentionally misleading.

Answer 1

Average fixed cost is obtained by dividing the fixed cost by the quantity of output produced, and the average fixed cost curve decreases as output increases due to the spreading of the overhead.

Step-by-step explanation:

Average fixed cost is obtained by dividing the fixed cost by the quantity of output produced. In this case, if the fixed cost is $1,000 and the quantity of output produced is not given, we cannot determine the exact shape of the average fixed cost curve.

However, regardless of the quantity of output, the average fixed cost curve will always decrease as output increases due to the fixed cost being spread over a larger quantity of output.

This process is known as "spreading the overhead."