Average fixed cost (AFC) increases as quantity increases.
Average variable cost (AVC), average total cost (ATC), and marginal cost (MC) first decrease as quantity increases, reach a minimum, and then increase.
Marginal cost (MC) is the change in total cost (TC) divided by the change in quantity from one unit of output to the next.
Average fixed cost (AFC) is calculated by dividing total fixed cost (TFC) by a specific quantity.
1 answer
The incorrect statement is:
Average fixed cost (AFC) increases as quantity increases.
This statement is incorrect because average fixed cost (AFC) actually decreases as quantity increases. AFC is calculated by dividing total fixed cost (TFC) by the quantity of output produced. As quantity increases, the same fixed costs are spread over a larger number of units, resulting in a lower average fixed cost.
