As Output Increases, Average Fixed Costs

question 272

Multiple Choice

As output increases, average fixed costs

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

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Definitions:

Substitution Effect

The economic understanding that as prices rise or income decreases, consumers will replace more expensive items with cheaper alternatives.

Price of Capital

The cost of using capital assets, which can include interest rates on loans used to purchase the assets or opportunity costs of investing capital elsewhere.

Demand for Labor

The total amount of labor that employers want to hire at varying wage rates in a given time period.

Related Resource

Resources that are connected or relevant to one another in such a way that the presence, absence, or alteration of one can affect the other.