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In economics, average fixed cost (AFC) is the fixed costs of production (FC) divided by the quantity (Q) of output produced. Fixed costs are those costs that must be incurred in fixed quantity regardless of the level of output produced. =. Average fixed cost is the fixed cost per unit of output.
Average fixed cost continuously falls as production increases in the short run, because K is fixed in the short run. The shape of the average variable cost curve is directly determined by increasing and then diminishing marginal returns to the variable input (conventionally labor). [4]: 210
1. The Average Fixed Cost curve (AFC) starts from a height and goes on declining continuously as production increases. 2. The Average Variable Cost curve, Average Cost curve and the Marginal Cost curve start from a height, reach the minimum points, then rise sharply and continuously. 3. The Average Fixed Cost curve approaches zero asymptotically.
Here’s an example. The ABC Company makes widgets. The company has fixed costs of $10,000 per month. Each widget costs the company $3.00 to make, and it sells each widget for $5.00.
When some fixed costs are non-sunk, the shutdown rule must be modified. To illustrate the new rule it is necessary to define a new cost curve, the average non-sunk cost curve, or ANSC. The ANSC equals the average variable costs plus the average non-sunk fixed cost or ANSC = AVC + ANFC.
The average fixed cost curve is a decreasing function because the level of fixed costs remains constant as the output produced increases. Both the average variable cost and average total cost curves initially decrease, then start to increase.
In accounting and economics, fixed costs, ... Cost curve; References This page was last edited on 13 March 2024, at 07:20 (UTC). Text is available ...
On September 23, the average five-year fixed mortgage rate was 4.75%, and the two-year fix was 4.74%. ... Rises in the Bank of England base rate have been pushing up borrowing costs.