How can the average-fixed-cost curve be declining when fixed cost is constant?

Average-Fixed-Cost Curve

A graph that shows the average fixed costs of production at different levels of output.

Fixed Cost

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance, remaining constant regardless of production volume.

Determine the relationship between fixed costs, variable costs, average costs, and their behaviors over the output level.

Verified Answer

Final Answer :

Although fixed cost is unchanged as output increases, AFC = FC/Q. Thus, AFC is always declining as output increases.

Learning Objectives

Determine the relationship between fixed costs, variable costs, average costs, and their behaviors over the output level.