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JAMB Economics 2002 Question 27

Question 27

Theory of Costs and Revenue

As a firm increases its output, the average fixed cost

  1. A.tends to rise continuously
  2. B.remains constant
  3. C.rises and then falls
  4. D.tends to decrease continuously
Show the answer and explanation

Answer: D (tends to decrease continuously)

Explanation

Fixed cost stays the same, so dividing it over more units makes average fixed cost fall continuously.