Average Fixed Cost (AFC)
Definition
Average Fixed Cost is calculated by dividing fixed costs by the quantity produced. It represents the fixed cost per unit of output for a firm.
Analogy
AFC can be compared to a gym membership fee. If you pay $100 per month for your gym membership, regardless of how many times you go, your average fixed cost per workout session would decrease as you visit the gym more frequently.
Related terms
Total Fixed Cost (TFC): The sum of all costs that do not change with changes in production levels.
Marginal Cost (MC): The additional cost incurred by producing one more unit of output.
Average Variable Cost (AVC): Calculated by dividing variable costs by the quantity produced. It represents the variable cost per unit of output for a firm.
"Average Fixed Cost (AFC)" appears in:
Study guides (2)
Practice Questions (3)
What happens to average fixed cost (AFC) as the quantity of output increases?
A company experiences a decrease in its average fixed cost (AFC) while its average variable cost (AVC) remains unchanged. Which of the following factors is most likely responsible for this change?
What happens to average fixed cost (AFC) when a lump sum tax is imposed?
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