Answer :

Average fixed cost is per unit cost on fixed factors, it decreases with increase in output.

Average fixed cost = Total Fixed Cost / No. of Units Produced


Cost Schedule



Graph



Average variable cost is per unit cost of variable factors it remains constant.


Average variable cost = Total Variable Cost / No. of Units Produced


Cost Schedule



Graph



Average total cost means total cost per unit of output it is a u shaped curve like average variable cost. The average fixed cost is represented by a rectangular hyperbola


Average total cost = Total Cost / No. of Units Produced


Cost Schedule



Graph



Relationship between Average Fixed Cost, Average Variable Cost, and Average Cost -


• Average fixed cost curve is rectangular hyperbola.


• It falls continuously to the right but will never touch the x-axis because average fixed cost can never be zero.


• Average variable cost and average total cost or average cost curve is U shaped.


• Average cost curve lies above average variable cost curve and as output increases the vertical difference between two curves will decrease but they will never intersect.


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