- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 3. Marginal Revenue, Marginal Cost and Profit Maximization
CFA Practice Question
A firm's average fixed costs ______
B. are always larger than variable costs in the short and long run.
C. are the same no matter what quantity the firm produces.
D. are equal to zero only when the level of production is also zero.
E. always increase as output increases.
A. are determined by dividing the total fixed cost by the amount produced.
B. are always larger than variable costs in the short and long run.
C. are the same no matter what quantity the firm produces.
D. are equal to zero only when the level of production is also zero.
E. always increase as output increases.
Correct Answer: A
Since the fixed costs are the same no matter how much is produced, average fixed costs (fixed costs divided by output) fall as output increases.
User Contributed Comments 3
| User | Comment |
|---|---|
| danlan | Total fixed costs are the same, but average tixed costs are divided by the amount produced |
| Smurfy | so the more you produce, the more the average fixed cost falls (since total fixed costs are constant) |
| boddunah | aver.fixed cost is total fixed cost divided by the amount produced.so average fixed cost depends on amount produced ,not total fixed costs. |