Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen?
A)Marginal costs and average variable costs would both rise.
B)Average fixed costs and average variable costs would rise.
C)Average fixed costs and average total costs would rise.
D)Average fixed costs would rise, but marginal costs would fall.

Question

Quizplus · Accepted Answer

Fixed costs do not affect marginal costs or average variable costs because they are constant regardless of the level of production. However, an increase in fixed costs would increase both the average fixed costs and the average total costs, as these costs are spread over the units produced.

Other Things Equal, If the Fixed Costs of a Firm