Part 1Draw an average fixed cost curve. Label it. Click toenlargegraph Part 1Why does the AFC curve have this shape?The AFC curve has this shape because _______. A. when output increases, total fixed cost decreases B. when output increases, total fixed cost increases C. it reflects diminishing returns D. when output increases, the firm spreads its total fixed cost over a larger output Part 1
0246810048121620Output (gift baskets per day)Cost (dollars per basket) AFCAFC Edit coordinates interactive graph Draw only the objects specified in the question.

Question

Part 1Draw an average fixed cost curve. Label it. Click toenlargegraph Part 1Why does the AFC curve have this​ shape?The AFC curve has this shape because​ _______. A. when output​ increases, total fixed cost decreases B. when output​ increases, total fixed cost increases C. it reflects diminishing returns D. when output​ increases, the firm spreads its total fixed cost over a larger output Part 1
0246810048121620Output (gift baskets per day)Cost (dollars per basket) AFCAFC Edit coordinates interactive graph​>>> Draw only the objects specified in the question.

BlackTom AI · Accepted Answer

Let’s break down what the question is asking and what each option implies about the average fixed cost (AFC) curve.
Option A: 'when output increases, total fixed cost decreases.' This is incorrect because total fixed cost (TFC) is constant regardless of output in the short run; it does not fall as production rises. The AFC curve would not reflect a decreasing TFC—rather, it would remain at a fixed level in total terms, while average per unit would change as production changes.
Option B: 'when output increases, total fixed cost increases.' This is also incorrect since, by definition, fixed costs do not vary with output in the short run. If TFC rose with output, that would contradict the concept of fixed costs being fixed.
Option C: 'it reflects diminishing returns.' Diminishing returns explain how total product changes with more input, or how marginal/productivity changes. They do not directly explain why AFC has its particular downward-sloping shape; AFC is determined by how fixed costs are allocated over more units, not by diminishing returns per se. So this choice misattributes the cause of the AFC shape.
Option D: 'when output increases, the firm spreads its total fixed cost over a larger output.' This is precisely the reason the AFC curve slopes downward: as output grows, the same fixed cost is divided among more units, reducing average fixed cost per unit. The mathematical idea is AFC = TFC / Q, so as Q increases, AFC falls.
In summary, only option D correctly identifies that the downward slope of the AFC curve arises from spreading fixed costs over more units of output, while the other options either misstate the behavior of fixed costs or misattribute the cause to diminishing returns.

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