As Output Decreases, Average Fixed Costs

question 185

Multiple Choice

As output decreases, average fixed costs

• A) decrease.
• B) initially decrease and then increase.
• C) remain constant.
• D) increase.

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Definitions:

Short Run

Describes a period in which some factors of production or inputs are fixed, limiting the ability of a business to fully adjust to market changes.

Long Run

A period in which all factors of production and costs are variable, and firms can adjust all inputs.

Inputs Fixed

Refers to factors of production (like capital and land) that remain constant in quantity, regardless of the level of output.

Inputs Variable

Factors of production such as labor, land, and capital that are used to create goods and services.