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Production and cost — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost4 Marks
Question
Explain the behaviour of average fixed cost using numerical example.
✓

Answer

  1. The per unit cost incurred on fixed factors of production is known as average fixed cost.
$\text{AFC}=\frac{\text{TFC}}{\text{Output}}$
  1.  
Units of commodity
TFC
AFC
0
60
-
1
60
60
2
60
30
3
60
20
4
60
15
5
60
12
AFC falls as output increases because

$\text{AFC}=\frac{\text{TFC}}{\text{Output}}$and TFC remains constant.

So, as output increases, TFC remains constant, AFC falls.

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