Refer to Figure 13-2. Which of the following curves is most likely to represent the average fixed cost (AFC) curve?

• A. A horizontal line above the origin
• B. A curve that rises continuously as output increases
• C. A curve that first decreases, then increases as output rises
• D. A curve that declines continuously as output increases

Answer: (D)

Verified step by step guidance

1. Recall the definition of Average Fixed Cost (AFC), which is the fixed cost divided by the quantity of output produced: \(\text{AFC} = \frac{\text{Fixed Cost}}{Q}\).
2. Understand that fixed costs do not change with output, so as output \(Q\) increases, the fixed cost remains constant while the denominator increases.
3. Since the fixed cost is constant and the output increases, the AFC must decrease as output rises, because you are spreading the same fixed cost over more units.
4. Recognize that this behavior means the AFC curve is downward sloping and approaches zero but never touches the horizontal axis (output axis).
5. Therefore, among the options, the curve that declines continuously as output increases best represents the AFC curve.