Question

Fixed cost per unit _________ with rise in output and _______ with fall in output.

• A. decreases, increases
• B. increases, decreases
• C. is constant, remains same
• D. None of the above

Answer 1

Answer: (A)

decreases, increases

Fixed cost remains constant in term of total value. As output increase, fixed cost per unit decreases and vice versa. For example, Rent Rs.5000 is a fixed cost.If the output is 100 units, fixed cost per unit will be Rs.50. If output is 200 units, fixed cost per unit will reduced to Rs.25 per unit.