9. The average fixed cost ____________ when the quantity produced ____________

Question

BlackTom AI · Accepted Answer

First, restating the question and options: The question asks how average fixed cost (AFC) changes with quantity produced. The options are:
- increases, increases
- decreases, decreases
- decreases, increases
- remains the same, decreases

Option 1: 'increases, increases.' This would imply AFC rises as output expands and AFC also rises with more output. In reality, fixed costs are spread over more units as production grows, so average fixed cost does not rise with higher output. Instead, it tends to fall or stay the same in light of the spreading effect; thus this option contradicts the standard AFC behavior.

Option 2: 'decreases, decreases.' Here AFC would fall when quantity rises and fall again if output increases further. While AFC does fall as output increases, the second part implies AFC would decrease with more output as quantity changes, which is inconsistent because once fixed costs are spread, AFC does not exhibit a continued decreasing pattern solely due to more production without other changes. This makes the pair less plausible as the canonical relation.

Option 3: 'decreases, increases.' This captures the classic relationship: average fixed cost falls as output expands (spreading the fixed cost over more units), but average variable cost does not determine AFC directly; the phrasing attributes the production change to the quantity, and the key idea is that AFC decreases with higher quantity. The connection that AFC decreases with more output is consistent with the theory of how fixed costs behave in the short run, since they are constant per period regardless of output level, and averaging them over more units reduces the per-unit amount.

Option 4: 'remains the same, decreases.' The idea that AFC remains unchanged with greater output contradicts the fundamental concept that fixed costs are spread over more units, reducing AFC as quantity increases. Therefore, this option misstates the primary behavior of AFC across varying output levels.

Synthesis: The correct description of AFC in relation to quantity produced is that average fixed cost decreases as output increases, due to the spreading of fixed costs over a larger number of units, while the change described in the option aligns with the decreases in AFC when quantity rises. The combination that reflects this standard relationship is the third option, which states 'decreases, increases' in the given format. Note how the second part subtly references the impact of increased production on unit costs by implying a scale in quantity, which matches the intuitive decline of AFC with higher output, even though the direct driver is the spreading of fixed costs over more units.

25FAL-ECO-8-48630 Quiz 7 [ DUE: SAT 10/18]

9. The average fixed cost when the quantity produced

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