EBK ESSENTIALS OF ECONOMICS
4th Edition
ISBN: 8220103647380
Author: KRUGMAN
Publisher: MAC HIGHER
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Chapter 6, Problem 10P
To determine
Concept Introduction:
Fixed cost (FC): It is a cost which is constant in the short run, it is not related to any change in the production of goods or service, it will be fixed disregarding of an increase or decrease in output.
Variable cost (VC): This cost is directly proportional to the level of output produced, it increases with the increase in output and vice versa.
Here,
- AFC is the average fixed cost.
- AVC is the
average variable cost . - ATC is the average total cost.
Average fixed cost (AFC): This is the cost, which is constant for the firm irrespective of the output produced by the firm. So the AFC is a fixed cost per unit produced by the firm. It refers to the total fixed cost divided by the output.
Here,
- AFC is the average fixed cost
- TFC is the total fixed cost
- Q is the quantity of output.
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