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Relationship between SAC and LRAC

The average f...

Question

The average fixed cost curve does not touch the output axis because __________.

A

AFC cannot be negative

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B

AFC cannot be zero

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C

AFC cannot be less than one

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D

none of the above

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Solution

The correct option is C AFC cannot be zero
Fixed costs are the costs that are incurred even when the output is zero. Hence, AFC cannot be zero and its curve does not touch the output axis.

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