The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a ______ average _____ cost.
A) spreading; lower; fixed
B) spreading; higher; fixed
C) diminishing returns; lower; variable
D) diminishing returns; higher; variable

Question

Quizplus · Accepted Answer

The spreading effect refers to the distribution of fixed costs over a larger output, which results in a lower average fixed cost.

The Larger the Output, the More Output Over Which Fixed