Micro

Production & Costs

Easy

If the average fixed cost of production is the fixed cost per unit of output produced. Then it will _______.

Remains same at all levels of output.

Increases with increase in the level of output.

Decreases with increase in level of output.

First increases and then decreases as the output is increased.

✅ Correct Option: 3

Option 1 -> Incorrect. While fixed costs remain constant, average fixed cost changes as output changes.

Option 2 -> Incorrect. AFC does not increase with output; it moves in the opposite direction.

Option 3 -> Correct. Since fixed costs are constant, dividing by larger output quantities results in lower AFC.

Option 4 -> Incorrect. AFC follows a continuous declining pattern, not a U-shaped curve.

Hence, Option 3: Decreases with increase in level of output -> Average Fixed Cost (AFC) = Total Fixed Cost / Quantity. Since total fixed cost remains constant at all output levels (e.g., rent, salaries), when we divide this constant amount by an increasing quantity of output, the AFC continuously decreases. For example, if TFC = ₹1000: at Q=10, AFC=₹100; at Q=50, AFC=₹20; at Q=100, AFC=₹10. This creates a rectangular hyperbola curve that approaches zero but never touches it. -> correct

2025: 29 May Shift 1

In Microeconomics, what does supply refer to?

2025: 28 May Shift 1

What does the rectangle OVBq₀ depicts in the given figure?

2025: 31 May Shift 1

The core reason behind the arising law of proportion is............

Factor proportion changes with keeping one factor constant.
Decrease in all input.
Increase in all input.
All factors remain constant.

2025: 28 May Shift 1

A firm increased the capital by a unit, which led to a rise in total product from 10 units to 24 units. Further increase in capital in the same quantity leads to an increase in total product to 40 units. What is the difference in change in marginal product?

2026: 19 May Shift 2

Match the LIST-I with LIST-II

LIST-I	LIST-II
A. Short run marginal cost	I. A rectangular hyperbola shaped curve whose value decreases with increase in output.
B. Total fixed cost	II. The shape of this cost curve is U-shaped and its value is undefined at zero output.
C. Average fixed cost	III. An upward sloping curve derived grom the vertical summation of TFC and TVC.
D. Total Cost	IV. A horizontal straight line, the value of which cannot be changed.

Choose the correct answer from the options given below:

2026: 19 May Shift 2

In the short run, when a fixed input is combined with increasing variable inputs, the following changes in Average Product (AP) and Marginal Product (MP) are witnessed. Select the correct order of such change starting with the first unit employment of variable input.

A. AP and MP both decrease and AP > MP

B. AP and MP both increase and AP < MP

C. AP intersects MP and after that AP > MP

D. AP = MP, for the first level of output

Choose the correct sequence from the options given below:

If the average fixed cost of production is the fixed cost per unit of output produced. Then it will _______.

Solution

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