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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is Chapter 7, Problem 31CTQ, A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output What does the average fixed cost curve look like? Use your response to explain what "spreading the overhead” means.

To determine

The shape of the average fixed cost curve and the meaning of the term “spreading overhead”.

Explanation

We know that fixed cost stays unchanged with change in the output level. It is the cost which has no relation with the output level of the firm. Therefore, as output level rises the average fixed cost, which is the fixed cost divided by the level of output, keeps on falling...

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