Question

Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $100. Her variable costs are $1,500 for the first thousand posters, $1,200 for the second thousand, and then $800 for each additional thousand posters. What is her AFC per poster (not per thousand!) if she prints: a)1,000 posters b)2,000 posters c)10,000 posters

Answer 1

a)- AFC per 1000 Posters:

= 100/1000

= 0.1 $

b)- AFC per 2000 Posters

= 0.05$

c)- AFC per 10,000 posters

= 0.01$

Answer 2

AFC per poster in all three cases are

a) AFC per 1000 Posters= 100/1000= $ 0.1

b) AFC per 2000 Posters= $0.05

c) AFC per 10,000 posters= $0.01

What do you mean by AFC?

Average fixed cost (AFC) in economics refers to the fixed cost per unit of production. Costs that are fixed do not change as the output changes. Total fixed cost divided by output level yields the AFC. Whether we are considering a cost in the short-term or long-term determines whether it is constant or variable.

The typical fixed expenses Because fixed expenses are spread out over a broader area as production volume grows, the AFC curve slopes downward. The vertical difference between ATC and AVC is equivalent to AFC. The other cost curves' U-shape is explained by variable returns to scale.

Learn more about average fixed cost here

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