Which of the following statements is true?
A) Average fixed cost equals average total cost plus average variable cost.
B) Average variable cost is always greater than average fixed cost.
C) Average fixed cost equals total fixed cost divided by total output.
D) Average total cost always falls as output increases.

Question

Quizplus · Accepted Answer

Average fixed cost is calculated by dividing the total fixed cost by the total output. Option A is incorrect as average fixed cost is the sum of average variable cost and average total cost. Option B is incorrect as average fixed cost can be higher or lower than average variable cost depending on the level of production. Option D is also incorrect as average total cost may initially fall and then rise again due to diseconomies of scale.

Which of the Following Statements Is True