Question

As a toy company produces more toys the average total cost of each toy produced decreases. This is because: total fixed costs are decreasing as more toys are produced. average variable cost is decreasing as more toys are produced. total variable cost is decreasing as more toys are produced. None of the above.

Answer 1

total fixed costs are decreasing as more toys are produced.

Step-by-step explanation:

Costs are classified as variable or fixed based on their relationship with the level of activity.

At any given level of activity, variable unit costs are constant. However, the unit fixed costs decrease as more units are produced.