Average fixed costs a exist only in the long run b are the c

Average fixed costs

a. exist only in the long run

b. are the costs of variable inputs

c. decrease as output increases

d. become negative at high enough levels of output

Solution

Average fixed cost is calculated as follows -

Average fixed cost = Total fixed cost/Output produced

As we know that Total fixed cost remains same irrespective of the output produced. So, with increase in output, total fixed cost remains same.

As Total fixed cost remains same with increase in output, numerator of formula to calculate average fixed cost remains same while denominator increases.

When numerator of a fraction remains same while its denominator increases, value of fraction decreases.

So, with total fixed cost remaining same, each increase in output results in decrease in value fo average fixed cost.

Thus, average fixed costs decrease as output increases.

Hence, the correct answer is option (c).